Ethereum Foundation spinout EthSystems targets banks with blockchain privacy technology

Ethereum Foundation Spinout EthSystems Targets Banks with Blockchain Privacy Technology

Former members of the Ethereum Foundation's Institutional Privacy Task Force have launched EthSystems, a new for-profit startup that will build privacy infrastructure for banks and other institutions using Ethereum, commercializing work previously developed inside the foundation.

The launch is the latest EF spinout following recent organizational changes, joining newly formed entities EthLabs and Ethereum Institutional as the ecosystem restructures its approach to protocol development and institutional adoption.

A team of former Ethereum Foundation researchers focused on institutional privacy has launched EthSystems, a new for-profit company aimed at building confidentiality infrastructure for financial institutions using Ethereum. The startup emerged from the Ethereum Foundation, which spent the past year developing privacy technologies for enterprise use cases while engaging with central banks, regulators, global banks and asset managers.

The spinout comes amid one of the biggest organizational shakeups in the Ethereum Foundation in years. Following months of criticism over leadership, strategy and the foundation's role in supporting Ethereum's increasingly institutional user base, several teams have recently been spun out into independent organizations. Among them are:

• EthLabs, a nonprofit focused on advancing Ethereum protocol research and scaling
• Ethereum Institutional, a separate nonprofit designed to coordinate institutional adoption and engagement with large financial firms

Together, the organizations represent an effort to distribute responsibilities previously housed within the foundation across more specialized entities.

Commercialization Plans

EthSystems said it plans to commercialize work it began inside the foundation, including:

• Confidential stablecoin transfers
• Private bond issuance
• Cross-chain settlement systems
• Open-source protocol specifications

"Commercial engagements need a commercial counterparty," the company said in a post on X, explaining its decision to operate as a for-profit business. "The model is simple: we continue the work we've been doing, only now we charge for it."

Institutional Demand for Privacy

The launch reflects growing institutional interest in using public blockchains for financial infrastructure beyond cryptocurrency investing. While firms have increasingly embraced tokenized assets and stablecoins, many remain reluctant to transact on fully transparent public ledgers, creating demand for privacy-preserving infrastructure.

EthSystems argues that confidentiality is one of the key barriers preventing banks and asset managers from moving real-world financial flows onto Ethereum. The company said its approach will focus on modular privacy systems that allow participants to selectively disclose transaction information while maintaining Ethereum's security guarantees.

Investor Backing

The company is also backed by BitMine, SharpLink, Ethereum co-founder Joseph Lubin, SNZ and other Ethereum-focused investors.

Market Context

CEX trading volumes rose for the first time in five months in June, with spot climbing 15.3% to $1.11T and RWA perpetual volumes surging to a record $311B.

Why it matters: CEX trading volumes rose for the first time in five months in June, with spot climbing 15.3% to $1.11T and RWA perpetual volumes surging to a record $311B.

Read more: Ethereum Institutional launch draws support from across the Ethereum ecosystem