EthSystems launches to bring privacy tools to institutional Ethereum

EthSystems launched Tuesday as a for-profit company building privacy and compliance tools for institutions using Ethereum. For everyday crypto investors, the move is a signal that parts of the Ethereum ecosystem are trying to make the network more practical for banks and asset managers, not just traders and developers.

The company was formed by Mo Jalil, Oskar Thorén and Aaryamann Challani, who previously built and led the Ethereum Foundation’s Institutional Privacy Task Force, according to EthSystems’ launch materials. That task force spent the past year speaking with central banks, regulators, tier-one banks and asset managers, the company said.

EthSystems said on X that it builds “confidential systems for institutional Ethereum.” In plain terms, the firm is working on ways for financial institutions to use Ethereum without showing every sensitive detail on a public blockchain. A public blockchain is a shared database where transaction records can be viewed by anyone.

Why privacy is the sticking point

EthSystems argues that Wall Street has accepted crypto as an investment category, while still hesitating to use public blockchains as day-to-day financial infrastructure. The company pointed to institutional interest in stablecoins, tokenized assets and settlement on Ethereum.

Stablecoins are crypto tokens designed to track the value of assets such as the U.S. dollar. Tokenized assets are traditional financial assets represented as blockchain tokens. On-chain settlement means completing the transfer and recordkeeping of a transaction directly on a blockchain.

The problem, according to EthSystems, is that institutions do not want trade details, positions or client identities exposed to the open market. The company says each participant in a transaction should be able to see the information it is entitled to see, while keeping other data private.

EthSystems said it has already published a year of open-source work. That includes prototypes for private bonds, confidential stablecoin transfers, private cross-chain settlement, hardened shielded pools and an Ethereum Privacy Map that tracks institutional privacy requirements across the ecosystem. Shielded pools are privacy systems designed to hide transaction details from public view.

A for-profit break from the Foundation

The firm’s business model is consulting and implementation work for clients. EthSystems said it will offer workshops, architecture reviews, protocol specifications and production systems. The company also said it plans to keep releasing open-source work alongside paid engagements.

Jalil is CEO of the new company and previously worked at Goldman Sachs, according to his public profile cited by EthSystems. Thorén has said he spent close to a decade working on crypto privacy infrastructure, including peer-to-peer messaging and the Waku protocols now associated with Logos.

EthSystems is the third organization to spin out of the Ethereum Foundation this summer and the first for-profit one, according to the company. It is backed by Ethereum treasury firms Bitmine and Sharplink, as well as Ethereum co-founder Joe Lubin.

The launch comes during a broader restructuring at the Ethereum Foundation. The Foundation cut 20% of its staff in June, reduced its budget, wound down its in-house privacy and scaling research unit and reorganized around a narrower mandate after at least nine senior figures departed during the year, according to prior reporting cited by EthSystems.

For Ethereum, the question now is whether independent teams like EthSystems can turn research into tools that regulated institutions are willing to use. EthSystems says the demand is there, but that confidentiality remains one of the main barriers to putting larger financial flows on public networks.

This story draws on original reporting from Decrypt.