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Wall Street is no longer ignoring Ethereum — it is arriving with specific, legally mandated demands that public blockchains cannot yet meet. That is the core message from Mo Jalil and Oskar Thoren, co-founders of ETH Systems, a for-profit spin-out from the Ethereum Foundation’s institutional privacy task force. Speaking on the Bankless podcast, the pair argued that the cryptography needed for institutional privacy largely exists, but the engineering and productization work does not. Their solution is a deliberate strategy: start with bespoke engagements to understand real institutional constraints, then generalize the learnings into reusable open-source building blocks. The prize is enormous. Jalil highlighted inter-dealer trade compression, a process where banks pay tens to hundreds of millions of dollars annually to trusted third parties to net out positions — a multi-billion-dollar market that Ethereum’s shared state could disrupt if confidentiality is preserved. The founders predict a wave of venture-scale privacy businesses will emerge within 24 months and that, within seven years, the vast majority of financial infrastructure will be on-chain. The unresolved question is whether Ethereum’s ecosystem can close the privacy gap before institutions conclude that private, permissioned networks are the only viable path.
Key Elements
Wall Street is at Ethereum’s door, but it will not come inside until someone solves a problem that many crypto builders have not even noticed exists. The gap is not transaction speed or scalability — it is privacy, and not the kind you might think.
According to Mo Jalil and Oskar Thoren, the co-founders of a new company called ETH Systems, institutions are not trying to hide from the law. They are trying to control exactly who sees what, when, and how. The two men spent years working on institutional privacy inside the Ethereum Foundation before spinning out as a for-profit operation this month. They spoke at length about what that transition has taught them on a recent episode of the Bankless podcast.
Their argument is blunt: the cryptographic primitives for institutional privacy already exist. What does not exist is the translation layer between cryptographic possibility and a bank’s legal, regulatory, and operational reality. That gap, they say, is the single biggest barrier to Wall Street adopting Ethereum at scale.
“I think some people often mistake privacy to be meaning hidden,” Thoren said. “I think privacy really is who can see what, when, and how.”
That distinction is not semantic. It is the foundational design principle for every solution ETH Systems is building. A bank does not want to disappear into anonymity. It wants selective disclosure: its regulator sees the trade, its auditor sees the balance, and its competitor sees nothing at all.
The Spin-Out Was an Act of Demand, Not Ideology
The decision to leave the Ethereum Foundation was not philosophical. It was structural. The Foundation is a non-profit, and non-profits cannot sign commercial contracts. That limitation, Jalil explained, was actively scaring institutions away.
“Being a nonprofit is actually a red flag sometimes” in institutional procurement, he noted. Banks and payment providers are not comfortable with a vendor that cannot be legally bound by a service agreement, cannot guarantee delivery, and cannot be held accountable through normal commercial channels.
At the Foundation, Jalil and Thoren ran the institutional privacy task force. They held workshops, published a market map, and ran proof-of-concepts. The inbound interest was high, but the engagement hit a wall every time the conversation turned to payment. A for-profit entity was not a nice-to-have; it was the only way to accept the institutions’ money and sign the contracts they required.
That spin-out came with roughly a year of accumulated work — write-ups, market analyses, and technical prototypes. The founders emphasize that while ETH Systems is new, the underlying work spans a decade. Jalil himself spent a decade in traditional finance, building algorithmic trading systems at Goldman Sachs before leading APAC business development at the Ethereum Foundation. Thoren spent his decade deep in privacy protocol work, including zk-proof research and design work at Status.
What Institutions Actually Need: A Tour Through the Constraints
The institutional privacy problem is not a scaled-up version of individual privacy. Thoren’s key insight is that it is a different category entirely. An individual wants to be anonymous. An institution wants to be known — but only to the right parties.
That distinction shows up in concrete ways. The founders described two use cases that illustrate the specificity of what banks and governments are asking for.
The first is a national-scale confidential payments project in a jurisdiction they declined to name. The regulatory framework there requires four actors in every payment: the sender, the receiver, an auditor, and the government. That is double the standard two-party model. Adding the auditor and the government to the loop, while maintaining confidentiality and national-scale throughput, defeated every existing protocol the institution tried over a two-to-three-year period.
The institution published a 16-page report explaining why the problem could not be solved. Then they found ETH Systems’ open-se: tens of millions of people
The second example is even more revealing of the financial stakes. Jalil described a tier-one investment bank that sends all of its trades and positions to a trusted third party for a process called inter-dealer compression. The third party nets out positions across multiple banks to reduce capital requirements and transaction counts. The banks hate the arrangement — they are handing their most sensitive data to an intermediary — but they tolerate it because the value is real.
The cost is staggering. Jalil put the annual price tag at “tens of millions, if not hundreds of millions of dollars.”
Ethereum’s shared state could theoretically eliminate that trusted third party. Every bank could see the netted result without any bank revealing its full book to a competitor. The catch: the entire world cannot be watching. That is a multi-billion-dollar business opportunity that most privacy teams have not even considered.
“My time is usually spent on the work that hasn’t already been solved, to be perfectly honest,” Jalil said. Private payments and tokenized deposits are well-understood. The permutations introduced by jurisdiction and regulation are not.
The Chess Game of Institutional Onboarding
The founders are not building a generic privacy layer and waiting for Wall Street to adopt it. That, they argue, is a dead end. Instead, they are pursuing a staged strategy that begins with the most specific, messy, and bespoke work possible — and then generalizes from it.
The approach mirrors startup methodology. Jalil cited Paul Graham’s famous advice to “do things that don’t scale” as directly applicable to institutional onboarding.
“You go in and you try to find out what works,” he said. “And, you know, Paul Graham also talks about things like, you know, do things that don’t scale. And that really is important when you work with institutions because they have these systems already.”
The path is deliberate. ETH Systems enters a specific use case, embeds with the trading desk and compliance team, learns the constraints that no white paper anticipated, and then extracts a generalized pattern. That pattern becomes an open- charity — it is a commercial enabler, because institutions often require open specifications before they will trust a system
The two workstreams — business-driven and open- generate intelligence about real constraints. That intelligence is generalized into permissively licensed libraries that elevate the entire ecosystem. As the libraries harden, more institutions can onboard with less bespoke work
Why Privacy and Transparency Are Not Enemies
The most obvious objection to institutional privacy is simple: if everything is hidden, how do you know anything is real? The host raised this directly. If a bank hides its activity, how does anyone verify that the bank is actually doing anything at all?
The founders’ response is that privacy and verifiability are not contradictory. They are complementary, and the mechanism is selective disclosure.
A bank transfer today is private to the public but visible to the sender, receiver, and their respective banks. That same model can apply on-chain. A private asset deposited into a lending protocol like Morpho can still report its total value locked. Private trades can still generate verifiable volume statistics. What privacy removes is the ability to see individual accounts, trading histories, and counterparty relationships.
That is not a hypothetical concern in current DeFi. The host cited the example of a $55 million whale trade on Uniswap being front-run because everyone could see the stablecoin inflow before the trade executed. Privacy, the founders argue, would fix that.
“You can definitely have a system where you sort of get transparency on the things that you want to be transparent and privacy of the things you want to be private,” Jalil said.
The design principle is that privacy is a spectrum. It is not a binary toggle between “public” and “hidden.” It is a set of permissions governing who can see what, when, and how. That is a more sophisticated — and more institutional — definition of privacy than the one most crypto builders have internalized.
The Adoption Arc: From Silo to Integration
The founders are clear-eyed that institutional adoption of Ethereum will not look like a bank suddenly plugging into Uniswap. It will unfold in stages.
The first stage is siloed private systems. Institutions will build confidential, compliant systems that mirror their existing business logic, running in parallel to public Ethereum. These systems will prove that on-chain operations work for institutional workflows, but they will not be composable with DeFi yet.
The second stage is proof of value. Once the siloed systems demonstrate that privacy-preserving on-chain operations are
The third stage is integration. Sophisticated institutions will start planning how to compose their private systems with public DeFi protocols like Uniswap, Aave, and Morpho. The more advanced players are already thinking about this, but they need to “level up” their understanding of what is possible.
The fourth stage is convergence. The market figures out how to intertwine the private and public worlds in a way that is both composable and compliant.
The translation work is substantial. Compliance officers and legal frameworks were written for the old world. Mapping those to technical capabilities is a decades-long transition. The founders note that “smarter money” will try to front-run this shift.
The Ecosystem Call to Action
The founders end with a direct request to the Ethereum ecosystem. To DeFi protocols, they ask for engagement — not in the abstract, but concretely: “come to us, talk to us, let’s look at the products to see what we can do to work together.” They are actively looking to modify existing DeFi products for institutional use cases.
To the open-repositories. The visibility is already there. “The number of banks that look at it is pretty large,” Jalil noted. A contribution to the open-
The broader theme is that the disconnect between what institutions ask for and what the ecosystem provides remains massive. Bridging it is not a one-company job. It is an ecosystem-wide effort that requires DeFi protocols to be more open-minded about who their users could be, and open-ate under
What Happens Next
The founders are making a prediction that should focus the attention of every Ethereum investor. Over the next 24 months, they expect a wave of venture-scale privacy businesses to emerge, driven by institutional engagements that take at least 18 months from first contact to production. That timeline means the seeds of the next privacy-focused cycle are being planted right now.
The seven-year vision is more audacious: by 2033, they believe the vast majority of financial infrastructure will be on a blockchain, with privacy invisible to end users. In that world, a non-US resident can trade US stocks without revealing their identity, trillions of dollars of assets move on-chain, and the affordances of DeFi — transferability, ownership, programmability — are available to everyone without the surveillance that currently accompanies them.
Whether that happens on Ethereum depends on a race between two forces. On one side, the ecosystem is closing the privacy gap through projects like ETH Systems, which are translating cryptographic research into institutionallytworks continue to offer a familiar, compliant environment for institutions that do not want to wait
The outcome is not yet decided. What is clear is that the next wave of Ethereum adoption will not come from retail DeFi. It will come from institutions moving existing, multi-billion-dollar business flows onto chain. And that movement is gated entirely on solving privacy. The company that does it first — and the network that supports it — will capture a market that makes the current crypto-fintech mafia look like a warm-up act.
Full content available at:What Ethereum Still Needs to Bring Wall Street Onchain
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Source: finance.biggo.com