Arca Ends Circle Relationship Over IPO Fallout
Arca, a major crypto investment firm, has announced it is cutting ties with stablecoin issuer Circle after being allocated what it called an unfairly small portion of shares during Circle’s initial public offering (IPO). The firm expressed frustration over receiving only a $135,000 allocation out of a $10 million order it placed early in the process, and has now decided to completely withdraw its support for Circle and its USDC stablecoin.
The criticism came directly from Arca’s Chief Investment Officer, Jeff Dorman, who published a detailed and strongly worded open letter on social media. The post was later deleted from X (formerly Twitter), but it had already drawn attention across the crypto industry.
Dorman’s post argued that Arca, as one of Circle’s earliest supporters, should have received a more meaningful allocation in the IPO. Arca placed its order on the first day of the offering and had been engaged with Circle for nearly a decade, even during periods when confidence in stablecoins was low and Circle was still developing its products.
Image 1: Jeff Dorman’s open letter to Circle (Source: Jeff Dorman)
Years of Loyalty Met With Disappointment
In the now-deleted post, Dorman shared that Arca had been instrumental in supporting Circle. He revealed that Arca has worked with Circle behind the scenes, offering operational support and strategic collaboration, particularly during market shocks such as the 2023 banking crisis and moments when USDC faced temporary price instability.
He stated:
“We’ve had you on our podcasts, and had you speak at our conferences when during challenging times. He wrote:USDC had virtually no traction and no AUM. We’ve defended USDC and stablecoins to every institution on the planet who called you and this industry a joke, including numerous conversations with the SEC on your behalf. Our ops team has worked tirelessly with your team testing product ideas, and offering improvements, and helping you through tough times like the the March 2023 banking crisis and other depeg.”
Despite this close history, Circle allocated only a fraction of Arca’s requested amount when it came time to distribute shares in the IPO. According to Dorman, Arca had been transparent with Circle for months about its plans to participate in the share offering. The firm even declined one-on-one meetings with banks leading the IPO because it already knew Circle so well from years of partnership.
Moving On from USDC
In response to the outcome, Arca has taken decisive action. It announced that it will completely close all accounts with Circle and stop using USDC. Instead, the firm plans to switch over to alternatives — specifically USDT and other stablecoins issued directly on blockchain networks.
Dorman explained this move in his original post, writing:
“Arca is closing all of our accounts with Circle and will tell every single dealer we work with that we will no longer accept USDC and will only use USDT and onchain stablecoins from here on out. We will also tell all of our customers and LPs in our funds how Circle operates, and we hope that they too pull their business from you.
He added that:
“If you want to see how irrelevant and generic your product has become, this is a decision that was easy to make and doesn’t affect our business one bit because there are perfect substitutes everywhere — something that could not have been said five years ago. We will gladly invest in, and encourage, others to continue to take market share from you.”
Arca’s announcement signals a larger shift in its strategy — distancing itself from centralised stablecoin issuers it feels no longer prioritise crypto-native stakeholders.
Image 2: (Source: The Business Times)
Circle’s IPO Sees Strong Market Response
Despite the controversy, Circle’s IPO itself has been considered a success by traditional market standards. The offering began on 27 May with a plan to issue 24 million shares. Due to strong interest, Circle raised the target to 32 million and eventually to 34 million shares. The offering raised about $1.05 billion in total.
Following the IPO, Circle’s stock surged on the New York Stock Exchange, climbing by more than 200% during its first hours of trading. The company’s stablecoin, USDC, remains the second-largest in the world by market capitalisation and is used across a wide range of crypto platforms and financial services.
Read Also: Circle Expands IPO Ahead of NYSE Listing, Boosts Share Price and Offering Size
Circle’s recent success with traditional investors has not softened the concerns of early backers like Arca. The firm’s disappointment centres on what it views as a shift in Circle’s priorities — moving away from its early crypto supporters in favour of large traditional finance institutions.
