Financial institutions are increasingly moving away from Ethereum (ETH), opting instead for purpose-built blockchains designed to meet their specific operational and privacy needs. Recent developments, including Klarna’s stablecoin launch on Tempo and the adoption of privacy-focused networks like Canton, highlight this trend and raise questions about Ethereum’s long-term dominance.

KlarnaUSD Launch Highlights Ethereum’s Challenges

On November 25, Klarna announced KlarnaUSD, becoming the first bank to issue a stablecoin on Tempo, a payments blockchain created by Stripe and Paradigm. Analysts argue this move could be bearish for Ethereum, which has historically hosted major stablecoins like USDT and USDC, commanding over $100 billion in combined market capitalization.

By bypassing Ethereum, Klarna may divert liquidity, fees, and innovation away from the network. As one analyst noted:

“Someone tell me why this isn’t bearish for Ethereum? A major fintech with a big move into stablecoins is not launching it on Ethereum.”

Another observer, Zach Rynes, emphasized that Klarna’s choice reflects a broader shift toward corporate blockchains, where large fintech firms and institutions are increasingly prioritizing tailored networks over public chains.

The Rise of Privacy-Focused Networks

Ethereum’s public ledger design exposes all transactions permanently, creating a transparency challenge for institutional users. Banks and corporations conducting large-scale transfers risk revealing sensitive business patterns, trade secrets, and strategic relationships. This has prompted a shift toward networks like Canton, a Layer 1 blockchain built with privacy controls at its core.

Institutions can configure Canton to be fully private, partially private, or permissionless while maintaining interoperability. Notably, Goldman Sachs’ Digital Asset Platform (GS DAP) utilizes Canton natively.

Capital efficiency metrics further favor these specialized networks. Canton produces roughly $96 of RWA TVL for every $1 of market capitalization, whereas Ethereum generates only about $0.03 of RWA TVL per $1 of market cap.

Why Institutions Are Moving Away

Privacy concerns are central to this shift. Public blockchains like Ethereum expose all transactions and metadata, which can be exploited by competitors or regulators. As noted by COTI Network, enterprises often view this transparency as a liability, particularly in contexts governed by regulations like GDPR.

Consequently, financial institutions are turning to private or specialized blockchains that provide confidentiality without sacrificing efficiency or interoperability.

The Outlook for Ethereum

This trend marks a potential split in blockchain usage:

• Public networks like Ethereum may continue to serve decentralized and retail markets.
• Institutions are increasingly adopting private, privacy-enhanced networks to protect sensitive data and optimize operations.

Whether Ethereum can regain institutional trust or specialized chains dominate this sector remains an open question, but the shift highlights the evolving priorities of the financial industry in the Web3 era.