Circle announced the launch of native USDC on Arbitrum today. Moving forward, users on Arbitrum will be able to mint, redeem, and bridge USDC through Circle’s CCTP network. The USDC that has been bridged through the Ethereum L1 will be renamed to USDC.e on Arbitrum and will be phased out over time. What does this mean?
It means that the “Settlement Layer” for USDC on Arbitrum is now Arbitrum, not Ethereum. When we think of the term “Settlement Layer”, for the most part what this means is the “Asset Issuance Layer”. Users who have USDC on Arbitrum are now using USDC on Arbitrum natively; they no longer have to deal with bridged USDC from the L1.
The practical implication here is no more bridge delays. If a user wants to bridge USDC from Ethereum to Arbitrum, instead of going through the official Arbitrum bridge, they will use CCTP. Circle will burn the USDC on L1 and re-issue the USDC on L2. When bridging back, the reverse. There’s no need to wait for fraud proofs because Circle is the source of Truth, not the bridge. Circle runs both Ethereum and Arbitrum full nodes and is able to finalize these transfers basically instantly.
In many respects, Ethereum is an L2 to Circle & USDC like Arbitrum is an L2 to Circle & USDC.