Mo Jalil, co-founder of EthSystems — a firm that recently spun out from the Ethereum Foundation — told CoinDesk that privacy remains the single biggest obstacle preventing mainstream banks from engaging with public blockchain networks. The statement comes as financial institutions increasingly explore distributed ledger technology but face unresolved regulatory and operational concerns around data confidentiality.
What Banks Actually Need From Privacy
Jalil clarified that the privacy requirements of financial institutions extend far beyond simple anonymity. In an interview, he explained that banks need granular control over who can view specific data, when that access is granted, and under what conditions. This includes the ability to selectively disclose transaction details to regulators while keeping them hidden from competitors or the general public.
“Nearly all financial institutions require some level of confidentiality,” Jalil said. “It’s not about hiding everything — it’s about having control over what is visible, to whom, and for how long.”
EthSystems’ Approach: Collaboration Over Competition
Rather than building an entirely new privacy layer from scratch, EthSystems plans to work with existing projects in the privacy ecosystem. Jalil emphasized that the firm is not trying to compete with established privacy protocols but instead aims to integrate and enhance them for institutional use.
This collaborative strategy could help bridge the gap between the permissionless nature of public blockchains and the strict compliance frameworks that banks operate under. By leveraging tools already developed by the broader privacy community, EthSystems hopes to reduce duplication of effort and accelerate adoption.
Why This Matters for the Industry
The conversation around privacy on public blockchains has intensified as more regulated entities experiment with tokenization, cross-border payments, and digital asset custody. Without robust privacy mechanisms, many of these use cases remain impractical or legally risky for banks.
If EthSystems succeeds in delivering a workable privacy infrastructure, it could unlock significant institutional participation in decentralized finance (DeFi) and other blockchain-based financial services — a development that would reshape the competitive landscape of the industry.
Conclusion
Jalil’s remarks highlight a critical bottleneck in the adoption of public blockchains by the traditional financial sector. While the technology offers transparency and immutability, those same features conflict with the confidentiality demands of banking. EthSystems’ decision to build on existing privacy tools rather than reinvent them suggests a pragmatic path forward — but execution will determine whether this approach gains traction with cautious financial institutions.
FAQs
Q1: What is EthSystems?
A: EthSystems is a blockchain infrastructure firm focused on building privacy solutions for banks and financial institutions. It recently spun out from the Ethereum Foundation.
Q2: Why is privacy a hurdle for banks on public blockchains?
A: Banks need to control who sees transaction data, when, and under what conditions. Public blockchains are transparent by default, which conflicts with regulatory and competitive confidentiality requirements.
Q3: Is EthSystems competing with other privacy projects?
A: No. Co-founder Mo Jalil stated that EthSystems plans to collaborate with existing privacy projects and leverage the current ecosystem rather than rebuilding privacy systems from scratch.
