Lubin backs EthSystems spin-out to build Ethereum privacy for banks
A team from the Ethereum Foundation has spun out to form a for-profit venture backed by Joe Lubin and major treasury firms to solve the privacy constraints keeping traditional financial institutions off the public blockchain.
Three former leaders of the Ethereum Foundation’s Institutional Privacy Task Force have launched EthSystems, a for-profit company backed by Ethereum co-founder Joe Lubin and the two largest Ethereum treasury firms, Bitmine and SharpLink.
The startup will provide consulting and technology to help banks and asset managers execute transactions on Ethereum without exposing trade details, positions, or client identities to the public network. "The business model is simple: bespoke consulting, focused on solving the hardest blockers for institutional adoption," the founders wrote.
Public blockchains broadcast transaction data to all participants, a fundamental barrier for regulated financial institutions managing sensitive client assets. EthSystems expects to use zero-knowledge cryptography to shield this data, building on prior work that included private bonds, confidential stablecoin transfers, and private cross-chain settlements.
During their tenure at the Foundation, the founders reported conducting hundreds of conversations with central banks, regulators, and financial institutions. This groundwork yielded open-source tools like the Ethereum Privacy Map and demonstrated that privacy technology could function on public infrastructure.
The spin-out is the latest structural shift within the Ethereum ecosystem following a turbulent period for the non-profit Foundation. Last month, the EF laid off 20% of its staff and reorganized into five clusters. This followed the departure of its two co-executive directors and three former leads of its Protocol R&D team.
The Foundation has narrowed its focus to "cypherpunk fundamentals" for individual users, doubling down on developing technology promoting Censorship Resistance, Open Source, Privacy, and Security. By shedding enterprise-facing work, the Foundation is effectively outsourcing the commercialization of Ethereum to the private sector.
Lubin, Bitmine, and SharpLink are actively funding independent entities to fill the resulting gaps. EthLabs will absorb significant protocol research and development duties, while Ethereum Institutional will serve as a neutral counterpart for traditional finance.
"As EF continues doubling down on cypherpunk fundamentals, especially with a focus on individuals, there’s room for an independent for-profit entity that can make different choices in the trade-off space," the EthSystems team wrote.
For institutions, the emergence of dedicated commercial partners removes a key obstacle to adoption. "Commercial engagements often require a commercial counterparty," the founders noted, framing EthSystems as the bridge between open-source protocol development and the compliance requirements of global capital markets.
