Ethereum faces mounting pressure from institutional competitors as financial firms increasingly favor purpose-built blockchains over the public network. Klarna's decision to launch its stablecoin on an alternative platform has intensified debate over whether privacy concerns will erode Ethereum's dominance in the institutional market.
What Happened: Stablecoin Launch
Klarna announced KlarnaUSD on Nov. 25, marking the first instance of a bank issuing a stablecoin on Tempo, a payments blockchain developed by Stripe and Paradigm. The move bypasses Ethereum entirely, despite the network hosting major stablecoins like Tether's USDT and Circle's USDC, which together command over $100 billion in market capitalization and drive significant network activity.
One analyst framed the development as a direct threat to Ethereum's market position.
"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. If Tempo didn't exist then this would have likely launched on Ethereum or an ETH L2…Tempo taking marketshare in what is the main thesis for Ethereum: stablecoins," the analyst stated.
Zach Rynes, another market observer, argued the decision reflects a broader trend of corporate blockchain adoption overshadowing public networks.
"Another confirmation that corpo L1 chains are here to stay and that your favorite commoditized 'neutral' public chain #375936 is getting steamrolled by Fintech yet again," he said.
The Canton Network exemplifies this institutional shift. Built as a Layer 1 network with privacy controls at its core, Canton allows institutions to adjust visibility from fully permissionless to completely private while maintaining cross-network application connectivity. Goldman Sachs' Digital Asset Platform operates natively on Canton, which produces around $96 of real-world asset total value locked for every $1 of market capitalization. Ethereum generates approximately $0.03 of RWA TVL per dollar of market cap.
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Why It Matters: Privacy Demands
Privacy drives the institutional exodus from public blockchains. Ethereum's transparent ledger makes all transactions permanently visible, creating substantial risks for banks and corporations transferring large sums. Competitors can analyze patterns, front-run trades and uncover strategic business relationships through blockchain forensics.
COTI Network's analysis notes that enterprises adopting Web3 often overlook blockchain transparency as a liability, with public ledgers exposing transaction metadata that can reveal sensitive data or undermine negotiation leverage. This transparency creates regulatory concerns under laws like GDPR and exposes trade secrets to competitors. When banks handle billion-dollar trades and confidential relationships, the celebrated virtue of crypto transparency becomes a vulnerability rather than an asset.
The shift suggests a growing divide in blockchain usage.
Public networks like Ethereum may increasingly serve decentralized or retail applications, while institutions migrate to private or specialized chains offering confidentiality. Whether Ethereum can reclaim institutional trust or specialized networks dominate the corporate market remains uncertain as financial services undergo digital transformation.
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