EthSystems, which spun out of the Ethereum Foundation earlier this month, is building privacy infrastructure for banks and other financial institutions, arguing that confidentiality, not scalability, is the main barrier to moving real-world financial activity onto public Ethereum.

Founder Mo Jalil said institutional demand has shifted from experimental blockchain pilots to production deployments, with banks increasingly seeking privacy-preserving tools that let them transact on public blockchains while still meeting regulatory requirements.

The startup, which emerged from the Ethereum Foundation’s Institutional Privacy Task Force, is focused on confidentiality infrastructure for banks, asset managers and governments that want to use Ethereum for tokenized assets, stablecoins and other financial applications.

Rather than creating a new blockchain, EthSystems says it helps institutions deploy privacy technologies that keep sensitive transaction data confidential while still settling on Ethereum. That distinction matters for firms that want the operational benefits of public-chain settlement without exposing information that internal policies or regulations require them to keep restricted.

“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, as well as Ethereum-native privacy protocols like Aztec and Miden, are also building infrastructure designed to support confidential enterprise transactions.

Where EthSystems says it differs is in its approach. The startup plans to advise institutions on privacy architecture, build custom infrastructure where needed and publish open-source research on institutional blockchain adoption. It says it is not trying to compete directly with existing privacy projects, but instead aims to work alongside them and recommend or integrate 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 amid 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 dedicated to privacy and cryptography for institutional users.

The decision to become a for-profit company was driven by the demand the team saw 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 both to finance the company’s work and to navigate procurement processes at large financial institutions.

“It just seemed like a more sustainable model,” Jalil told CoinDesk. “You can get financial institutions to fund your vision by doing the work they require and charging them a fee for it.”

The company said institutional demand has changed significantly over the past year. Early conversations were largely with innovation teams experimenting with blockchain technology. Now, Jalil said, discussions increasingly involve the business units responsible for running trading desks and managing assets, a sign that the questions are shifting from whether the technology can work to how it can fit existing controls.

“Their experimentation phase is over. Now it's actual people who want to get assets onchain and move real financial flows onchain.”

That shift supports EthSystems’ core view: institutions no longer need to be convinced that blockchain has potential, but rather need infrastructure that satisfies regulatory and confidentiality requirements.

“The only way to bridge the gap between public blockchains and institutional control is with cryptography and privacy,” Jalil said.

Read more: Ethereum Foundation spinout EthSystems targets banks with blockchain privacy technology