Arc Network

Arc Network (ARC) — Pre-TGE Analysis

CoinStudy Pre-TGE Listing | Halal With Concerns ⚠️

Project Overview

Arc is a Layer 1 blockchain built by Circle, the company behind USDC, the world's second-largest stablecoin with over $60 billion in circulation. Launched into public testnet in October 2025 with mainnet beta expected in summer 2026, Arc positions itself as the Economic Operating System for the internet, purpose-built for institutional stablecoin finance, payments, capital markets, and tokenized real-world assets.

In May 2026 Circle completed a $222 million ARC token presale at a $3 billion fully diluted valuation. The raise was led by Andreessen Horowitz with a $75 million investment, with additional participation from BlackRock, Apollo Funds, ARK Invest, Intercontinental Exchange, Standard Chartered Ventures, Bullish, and Haun Ventures. This is the first token presale ever conducted by a publicly listed company on a major stock exchange.

The ARC token serves as the network's native coordination asset for governance, validator security, network incentives, and the transition to a Proof of Stake consensus mechanism over time.

Technology

Arc is engineered around four core technical innovations that distinguish it from general-purpose Layer 1 blockchains.

Malachite Consensus Engine

Arc uses Malachite, a Byzantine Fault Tolerant consensus engine based on Tendermint, achieving deterministic sub-second finality. Unlike optimistic rollup systems where finality can take minutes to hours, Arc's transactions are irreversible within one second of confirmation. This deterministic finality is specifically designed for institutional financial workflows where settlement certainty is a prerequisite rather than a nice-to-have.

USDC-Native Gas Model

Arc uses USDC as its native gas token rather than a volatile speculative asset. Transaction fees are paid in US dollars, making costs predictable and budgetable for enterprise treasury teams. The fee model is based on a weighted moving average of network demand rather than block-level fee spikes, keeping costs stable even during periods of elevated network activity. Other stablecoins can be used for gas through a paymaster system.

EVM Compatibility

Arc is fully compatible with the Ethereum Virtual Machine, meaning developers can deploy existing Solidity smart contracts without modification, use familiar tooling including Foundry, Hardhat, and MetaMask, and migrate existing Ethereum applications to Arc with minimal friction.

Opt-In Privacy System

Arc includes a modular privacy architecture that allows businesses to selectively shield transaction amounts while preserving address visibility and auditability. This design is specifically intended to help enterprises meet regulatory and reporting obligations while maintaining transactional confidentiality where required. The first deployed feature is confidential transfers that shield amounts without hiding participants.

Stablecoin-First Architecture

This is Arc's most distinctive and compliance-relevant design decision.

Every major blockchain before Arc was built around a volatile native token for gas fees. Bitcoin uses BTC. Ethereum uses ETH. Solana uses SOL. When these tokens are volatile, gas fees become unpredictable in dollar terms, making institutional financial planning difficult and introducing a form of currency risk into every transaction.

Arc was designed from the beginning to eliminate this by making USDC the native gas token. A payment processor building on Arc knows that sending a $10,000 USDC transfer will cost a defined number of US cents regardless of any token market conditions. This makes Arc genuinely more suitable for institutional financial applications than any previous general-purpose blockchain.

Arc also includes a built-in FX engine, an institutional-grade Request for Quote system for price discovery and 24-hour peer-to-peer foreign exchange settlement. This enables direct onchain settlement between USDC, EURC, and other regulated stablecoin denominations without requiring external bridges or DEX routing.

Circle's full product stack, including USDC, EURC, CCTP cross-chain transfer protocol, Circle Payments Network, institutional on-ramps and off-ramps, and Circle Wallets, integrates natively with Arc. This creates an end-to-end stablecoin financial infrastructure that no competitor currently matches in terms of institutional readiness.

Ecosystem

Arc's testnet has attracted an unusually credible set of institutional participants that distinguishes it from typical blockchain projects at this stage.

Financial institutions participating in Arc testnet include BlackRock, Goldman Sachs, Visa, Standard Chartered, and Intercontinental Exchange. Technology partners include Amazon Web Services and Anthropic. Regional stablecoin issuers from multiple countries are testing integration with Arc's infrastructure.

Pyth Network has integrated real-time market data price feeds on Arc, providing over 200 data feeds for equities, commodities, foreign exchange, and cryptocurrencies. Chainlink has integrated data and cross-chain infrastructure for Arc builders. These oracle integrations are essential for financial applications requiring verified external price data.

Circle has indicated that Arc is designed to become the global settlement hub connecting ecosystems including Ethereum and Solana, routing USDC liquidity across chains through CCTP. This positioning could make Arc infrastructure that every major stablecoin application touches rather than simply another competing blockchain.

HCS Analysis — Halal Crypto Standard

This is the section that matters most for CoinStudy's Muslim investor audience. The analysis requires honest engagement with genuine complexity.

Layer 1 — Sharia Red Line Screening

Ecosystem Riba Exposure — ⚠️ The Most Important Concern

This requires the most careful and direct examination.

Arc is built by Circle, the issuer of USDC. CoinStudy has classified USDC as Haram because its reserves consist of cash, short-duration US Treasury securities, and similar interest-bearing instruments that generate interest income funding Circle's operations and USDC's stability mechanism.

The question for ARC token holders is whether this underlying USDC Riba concern transfers to the ARC governance token through economic dependence.

CoinStudy's methodology distinguishes between two different concerns. The first is whether the ARC token's own mechanism generates prohibited income. The second is whether the ARC token's value depends economically on the growth of prohibited financial activity.

On the first question, the ARC token itself does not directly generate interest income. It is a governance and coordination token for a blockchain network. Gas fees on Arc are paid in USDC rather than ARC, meaning ARC holders do not directly receive interest-like returns from USDC's reserve structure.

On the second question, Circle explicitly noted that as a 25% stakeholder in Arc's initial supply, Circle participates in operating validator infrastructure generating fee revenue and earning staking income. ARC's value is connected to Arc's network growth and adoption. Arc's primary use case is institutional USDC-denominated financial applications. The more institutional USDC flows through Arc, the more valuable the network infrastructure becomes.

This creates an indirect economic connection between ARC's value and USDC adoption. However USDC transaction fee revenue on Arc comes from transaction throughput on the network, not from the interest income on USDC's reserves. These are different revenue streams. The fee revenue comes from genuine service provision. The Riba concern in USDC is the reserve structure, not the transaction fees.

Following the infrastructure neutrality principle CoinStudy established across our analysis series, Arc the blockchain is neutral infrastructure similar to Ethereum hosting USDC. The fact that USDC is the primary asset flowing through Arc does not make Arc's infrastructure itself Haram any more than Ethereum hosting USDC makes Ethereum Haram.

The Ecosystem Riba Exposure check passes for ARC the token on the basis that the token's own mechanism does not generate interest income and the network operates as neutral payment and settlement infrastructure. The USDC compliance question remains a separate assessment that has not changed.

Result: ✅ Passed with the USDC-on-Arc concern honestly acknowledged in Layer 2 scoring.

Gambling and Betting — ✅ Passed

Arc is institutional financial infrastructure for payments, settlement, and capital markets. No gambling or betting mechanisms exist at the protocol level.

Haram Industry — ✅ Passed

Payment infrastructure, settlement systems, and institutional financial coordination are permissible business activities.

Guaranteed Interest — ✅ Passed

ARC stakers may receive discounted transaction rates and preferential access to Circle's services, not predetermined percentage returns on deposited capital. The distinction is meaningful. Service discounts are a loyalty benefit, not interest on a loan. No guaranteed predetermined interest-like returns exist in the ARC token structure itself.

Synthetic Interest Products — ✅ Passed

ARC is a governance and coordination token, not a synthetic interest-bearing instrument.

No red line violations were found. ARC is eligible for HCS scoring.

Layer 2 — HCS Score Breakdown

Overall Score: 72 / 100 — Halal With Concerns ⚠️

Financial Exposure Risk — 18/25
Gharar / Uncertainty — 11/15
Maysir / Speculation — 11/15
Underlying Business Activity — 14/15
Utility / Real Use — 9/10
Tokenomics Fairness — 5/10
Transparency / Governance — 4/10

Financial Exposure Risk — 18/25

The Financial Exposure Risk score of 18 reflects Arc's genuine infrastructure purpose alongside the honest acknowledgment of three specific concerns.

First, USDC is the primary asset flowing through Arc. While USDC's Riba concerns do not transfer directly to ARC, the network's primary value driver being USDC adoption creates indirect exposure to a Haram-classified asset's growth.

Second, Arc explicitly mentions lending protocols as a planned use case, with Circle's own documentation describing how developers can build credit infrastructure on Arc combining stablecoins with identity and reputation systems. If the lending protocols built on Arc charge interest to borrowers and pay interest to lenders, those protocols would be Haram applications on permissible infrastructure, consistent with how CoinStudy treats Aave on Ethereum. The infrastructure passes. Individual applications require separate assessment.

Third, USYC, which is tokenized US Treasury securities, is listed as a day-one native asset on Arc alongside USDC and EURC. CoinStudy has consistently classified Treasury-backed instruments as Haram in our stablecoin series. USYC being natively integrated rather than merely incidentally present is a meaningful distinction that elevates the Financial Exposure Risk concern beyond what typical neutral infrastructure would carry.

Gharar — 11/15

Arc's technical architecture is thoroughly documented through Circle's official whitepaper, developer documentation, and public communications. The Malachite consensus engine, USDC gas model, and opt-in privacy system are all well-explained.

Deductions reflect the pre-mainnet status creating genuine uncertainty about delivered performance versus promised performance, the permissioned validator set during the transition period creating centralization concerns, and the evolving governance structure whose practical implications for ARC holders are not yet fully determinable.

Maysir — 11/15

Arc was built for institutional finance, payments, and settlement, not for speculative financial instruments. The underlying infrastructure purpose is genuinely productive.

Deductions reflect that ARC token speculation in pre-TGE markets is driven primarily by excitement about Circle's institutional backing and a16z's investment thesis rather than by demonstrated network usage metrics, and that the $3 billion valuation at presale with no mainnet launched represents a very early-stage speculative premium.

Underlying Business Activity — 14/25

Payment infrastructure, settlement systems, institutional capital markets, cross-border value transfer, and enterprise blockchain services are fully permissible business activities. The USYC native integration provides a small deduction given our consistent classification of Treasury-backed instruments.

Utility and Real Use — 9/10

The combination of Circle's institutional credibility, the caliber of testnet participants including BlackRock and Goldman Sachs, the Chainlink and Pyth oracle integrations, and the genuine technical advantages of USDC-denominated gas with sub-second finality provide strong utility foundation. Small deduction for pre-mainnet status meaning utility remains demonstrated in testnet rather than production environments.

Tokenomics Fairness — 5/10

This is the most serious fairness concern in the analysis. Circle holds 25% of the initial 10 billion ARC token supply. This allocation is directly and significantly above the founding team allocations that have created Tokenomics Fairness concerns in previous analyses like Gnosis, Pyth, and Monad. A publicly listed company holding 25% of a blockchain's token supply, with the ability to operate validator infrastructure and earn staking income, represents a concentration of economic control that goes beyond what typical decentralized blockchain governance would suggest. The ongoing 2 to 3% annual inflation rate adds ongoing dilution concern for regular token holders.

Transparency and Governance — 4/10

This is the most significant concern in the analysis. Arc's current validator set is permissioned and selected based on operational resilience, geographic distribution, and regulatory compliance. This means Circle and its approved partners, not the broader token holder community, currently determine who secures the network. The transition to permissioned Proof of Stake, where Circle's language uses the word permissioned rather than permissionless, suggests governance may remain significantly controlled rather than fully community-governed even after the transition.

Additionally the relationships between Circle as a publicly listed company, Arc's validator network, and ARC token governance have not been clearly disclosed in a way that allows ordinary ARC token holders to understand what their governance rights actually entitle them to in practice versus what Circle's 25% stake and validator operation entitles Circle to.

Potential Use Cases

Arc's institutional focus creates a range of genuinely interesting use cases that Muslim investors should understand, with their compliance implications assessed individually.

Cross-Border Payments — Generally Permissible ✅

USDC transfers between counterparties settling in US dollars through Arc's instant finality infrastructure represent one of the clearest and most directly permissible use cases. Cross-border payment settlement is a genuine productive economic service. No Riba mechanism is involved in simple USDC transfer and settlement.

Capital Markets Settlement — Requires Individual Assessment ⚠️

Arc is designed to enable tokenized asset delivery versus payment, where a tokenized security and its corresponding payment settle simultaneously on-chain. The permissibility of this use case depends on whether the specific tokenized assets being settled are themselves permissible. Tokenized government bonds that pay interest are Haram regardless of how they are settled. Tokenized equity in halal companies would be permissible. Each specific capital markets application on Arc requires individual assessment.

Onchain Credit Markets — Haram Risk ❌

Circle's own documentation explicitly describes Arc as enabling developers to build lending protocols that integrate identity, cash flow history, and reputation systems to extend credit. If these credit protocols charge interest to borrowers and pay interest to lenders, they constitute conventional DeFi lending applications that CoinStudy classifies as Haram. Muslim investors should not participate in interest-based lending applications built on Arc regardless of how well-designed the infrastructure is.

AI Agent Payments — Potentially Permissible ✅

Arc's stablecoin-native gas model makes it genuinely suitable for autonomous AI agent payment systems where predictable costs are essential. An AI agent paying for legitimate API services, data access, or computational resources through USDC on Arc performs a genuine productive service transaction that has no inherent Riba concern.

FX Settlement — Grey Area ⚠️

Arc's built-in FX engine enables peer-to-peer settlement between different stablecoin denominations including USDC and EURC. The permissibility of foreign exchange transactions in Islamic finance depends on meeting the Sarf conditions requiring simultaneous exchange. Arc's deterministic sub-second finality actually creates better conditions for satisfying the simultaneous exchange requirement than slower settlement systems. However the specific stablecoin pairs being exchanged must each be individually assessed for their own compliance.

Testnet Participation Guide

Arc's public testnet launched in October 2025 and is actively accepting developer and community participation before mainnet launch.

Step 1: Access Arc Testnet

Visit docs.arc.network and connect your MetaMask or other EVM-compatible wallet to the Arc testnet network. The network ID and RPC details are available in the official documentation.

Step 2: Get Testnet Assets

Request testnet USDC and other testnet assets through the Arc faucet. These are test tokens with no real-world value used for experimenting with the network before mainnet launch.

Step 3: Explore the Network

Use the Arc testnet explorer to inspect transactions, contract deployments, and network activity. This gives a real sense of transaction finality speeds, fee structures, and network performance.

Step 4: Deploy or Interact with Smart Contracts

Developers can deploy existing Solidity contracts using Hardhat or Foundry with minimal configuration changes. Non-developers can interact with sample applications Circle has published on GitHub demonstrating USDC payments, CCTP cross-chain transfers, and other Arc capabilities.

Step 5: Join the Community

Participate in Arc House at community.arc.io, join the Arc Discord at discord.gg/buildonarc, and follow Arc's development updates. The Programmable Money on Arc Bootcamp runs through July 12, 2026 and offers structured learning for builders.

Step 6: Monitor for Mainnet Announcement

Circle has indicated mainnet beta is expected in summer 2026 without a specific date. Watch Arc's official channels for the mainnet launch announcement and any associated ARC token distribution or airdrop mechanisms.

Islamic Finance Note on Testnet Participation:

Testnet participation using test tokens with no real economic value does not raise Islamic finance concerns in itself. You are not lending, borrowing, or engaging in prohibited financial activity with test tokens. However if the testnet activities specifically involve testing interest-based lending protocols or perpetual futures applications built by other developers on the testnet, Muslim investors should avoid those specific applications even in testnet form, consistent with the principle that testing a haram financial product helps improve a haram product regardless of whether real capital is at risk.

Pre-TGE Listing Summary

Project Name: Arc Network

Token: ARC

Network: Arc L1 (EVM-compatible, USDC-native gas)

Status: Public Testnet Live, Mainnet Beta Expected Summer 2026

Token Status: Pre-TGE. Presale completed May 2026.

Presale Valuation: $3 billion fully diluted

Presale Raised: $222 million

Investors: a16z Crypto ($75M lead), BlackRock, Apollo Funds, ARK Invest, Intercontinental Exchange, Standard Chartered Ventures, Bullish, Haun Ventures

Issuer: Circle Internet Group (NYSE: CRCL)

Token Supply: 10 billion ARC

Allocation: 60% Ecosystem, 25% Circle, 15% Long-term Reserve

Annual Inflation: 2 to 3% target, neutrality goal long-term

CoinStudy HCS Score: 72/100

CoinStudy Classification: Halal With Concerns ⚠️

Important Notes for Muslim Investors

Before participating in Arc ecosystem activities or the ARC presale, consider the following honestly.

Arc's infrastructure is genuinely neutral Layer 1 technology that passes red-line screening. However USDC, the primary asset flowing through Arc, is classified as Haram by CoinStudy at the structural level due to its Treasury bill-backed reserve structure. The chairman has confirmed that using USDC as a pure medium of exchange is permissible for that individual, which is consistent with using it for Arc transaction fees in permissible payment and settlement activities.

USYC, tokenized US Treasury securities, is listed as a day-one native asset on Arc. CoinStudy classifies Treasury-backed instruments as Haram. Muslim investors should not hold or use USYC on Arc regardless of its native integration.

Credit and lending applications built on Arc must be individually assessed. Infrastructure permissibility does not transfer to application permissibility. An interest-based lending protocol on Arc is Haram regardless of how permissible Arc's infrastructure is.

Circle's 25% token allocation and permissioned validator set represent significant governance concentration that Muslim investors who value decentralization as an Islamic governance principle should weigh carefully.

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Disclaimer: This analysis is provided for educational and research purposes only. This is a pre-TGE analysis based on publicly available information. CoinStudy does not issue personal fatwas or financial advice. Please consult a qualified Islamic scholar for individual guidance. Pre-TGE investments carry significant risk. Token distribution, governance structure, and network features may change before mainnet launch.