Ethereum startup EthSystems says privacy is the key to bringing banks onchain
Key Takeaways
- •EthSystems was spun out of the Ethereum Foundation earlier this month and is focused on privacy and cryptography for institutional users.
- •The startup is targeting banks, asset managers and governments that want to use Ethereum for tokenized assets, stablecoins and other financial applications.
- •Co-founder Mo Jalil said financial institutions generally need confidentiality controls over transaction details, not necessarily full anonymity.
- •EthSystems says it will collaborate with existing privacy efforts such as Canton Network, Aztec and Miden instead of rebuilding the privacy stack.
- •The company said becoming a for-profit business will make it easier to finance development and work through large institutions’ procurement processes.
Ethereum startup EthSystems says privacy is the key to bringing banks onchain
EthSystems, a startup spun out of the Ethereum Foundation earlier this month, is betting that privacy, rather than scalability, is the main barrier keeping institutions from moving financial activity onto public blockchains.
The company emerged from the Ethereum Foundation's Institutional Privacy Task Force and is building confidentiality infrastructure for banks, asset managers and governments that want to use Ethereum for tokenized assets, stablecoins and other financial applications.
Instead of launching a new blockchain, EthSystems helps institutions deploy privacy technologies that keep sensitive transaction data confidential while still settling on Ethereum. That focus reflects a practical hurdle for many firms exploring blockchain use: public networks can offer shared infrastructure, but most regulated businesses still need controls over who can see transaction details and when.
"Almost every single financial institution requires some level of confidentiality," co-founder Mo Jalil told CoinDesk in an interview. "Confidentiality doesn't necessarily mean something has to be anonymous or hidden. There just needs to be controls over who sees what, when and how."
EthSystems is not the only company working on institutional privacy. Projects such as Canton Network, which is backed by major financial institutions including Goldman Sachs, BNP Paribas and DTCC, and Ethereum-native privacy protocols like Aztec and Miden are also developing infrastructure designed to enable confidential transactions for enterprises.
The startup says its approach is different because it plans to advise institutions on privacy architecture, build custom infrastructure where needed and publish open-source research on institutional blockchain adoption. It says it does not intend to compete with existing privacy projects, but to work alongside them by recommending and integrating technologies based on customer needs.
"We don't have one specific product, we have several, and we'll work with the existing privacy ecosystem rather than rebuild the entire privacy stack," Jalil said.
EthSystems is one of several organizations to emerge from the Ethereum Foundation as part of a broader restructuring intended to distribute responsibilities that had previously been housed within the nonprofit. Unlike sister organizations EthLabs, which focuses on protocol development, and Ethereum Institutional, which coordinates enterprise engagement, EthSystems is focused on privacy and cryptography for institutional users.
The move to become a for-profit company was driven by demand the team encountered while still inside the foundation. "We'd build these proof-of-concepts, and then institutions would ask, 'Can we pay your team to take this into production?'" Jalil said. "Every time I'd have to say, 'That's not something we do.'"
Operating as a commercial business, he said, makes it easier to fund the company's work and to navigate procurement processes at large financial institutions.