Ethereum Is Becoming an Institutional Platform: Danny Ryan Says Tokenization Isn’t Enough
Buenos Aires, Argentina – Devconnect, 28 April 2024 – In a candid interview recorded at Devconnect in Buenos Aires, former Ethereum Foundation researcher Danny Ryan, co‑founder and president of the infrastructure startup Etherealize, outlined why the next wave of crypto growth will be driven by institutional players rather than retail enthusiasts. Ryan, a principal architect of Ethereum’s transition to proof‑of‑stake (PoS), argued that banks and traditional finance firms are moving from “crypto‑averse” to “crypto‑essential,” but that simply issuing tokenized assets will not satisfy their needs.
From Skepticism to Strategic Imperative
When the interview began, Ryan noted a palpable shift in the tone of conversations he’s having with senior executives at major banks and asset managers. “A year ago the mantra was ‘we can’t touch crypto,’” he said. “Today the narrative is ‘if we don’t embed Ethereum into our core, we’ll be left behind.’”
This change, Ryan attributes to three converging forces:
- Regulatory Clarity – Recent guidance from the U.S. Securities and Exchange Commission (SEC) and the European Securities and Markets Authority (ESMA) has reduced the legal uncertainty surrounding on‑chain activities.
- Energy Concerns – Ethereum’s switch to PoS in 2022 slashed its energy consumption by more than 99 %, addressing one of the most vocal criticisms from institutional ESG committees.
- Infrastructure Maturity – Layer‑2 solutions, validator as a service (VaaS) platforms, and multi‑party computation (MPC) wallets now offer the reliability and compliance features required by banks.
Beyond ETFs and Tokenized Securities
While many institutions initially gravitated toward crypto‑linked exchange‑traded funds (ETFs) as a low‑risk entry point, Ryan warned that “ETFs are a bridge, not a destination.” He emphasized that the real value proposition lies in re‑architecting market mechanisms themselves.
“Tokenizing a bond or a real‑estate share is a useful experiment, but it’s still a thin veneer,” Ryan explained. “What the industry needs is a rewrite of the settlement, clearing, and custody layers from first principles, using the immutable and programmable nature of Ethereum.”
He pointed to several emerging use cases that illustrate this deeper integration:
- Atomic Settlement – Smart contracts that simultaneously exchange multiple assets, eliminating the need for separate clearing houses.
- Decentralized Identity & KYC – On‑chain verifiable credentials that allow banks to satisfy know‑your‑customer (KYC) obligations without exposing raw data.
- Programmable Compliance – Rules encoded directly into contracts, enabling automated enforcement of regulatory constraints such as jurisdictional limits or anti‑money‑laundering (AML) checks.
According to Ryan, these capabilities can reduce operational costs, shorten settlement cycles from days to seconds, and open new product categories that were impractical on legacy systems.
Privacy as a Baseline Requirement
A recurring theme in the conversation was the importance of privacy for institutional adoption. “Corporate treasury teams won’t hand over transaction data to a public ledger without strong confidentiality guarantees,” Ryan said. He outlined three technical avenues that Etherealize and other players are pursuing:
- Zero‑Knowledge Proofs (ZK‑Rollups) – Allow users to prove the validity of a transaction without revealing underlying data.
- Private Transaction Pools – Mixers and confidential transaction frameworks that obscure sender, receiver, and amount while preserving auditability for regulators.
- Secure Multi‑Party Computation (MPC) Wallets – Distribute key material across multiple parties, mitigating single‑point‑of‑failure and enabling threshold signatures that can satisfy corporate governance policies.
Ryan maintained that privacy is not an optional feature but a “table stakes” requirement for any on‑chain finance solution targeting regulated entities.
Analyst Perspective
Crypto‑focused analysts at a leading research firm concurred with Ryan’s assessment. “We see a pivot from speculative token holdings toward infrastructure‑as‑a‑service models,” said Maya Patel, senior analyst at CryptoMeta. “The market is beginning to price in the long‑term upside of institutions building their own layers on top of Ethereum rather than merely buying exposure through ETFs.”
Patel added that while tokenization will still play a role—particularly in niche markets like fine art and private equity—the “real upside” lies in the network effects generated when banks, custodians, and settlement houses interoperate on a shared, programmable protocol.
Key Takeaways
- Institutional Sentiment Has Shifted – Banks that once dismissed crypto are now actively evaluating Ethereum as a core component of future financial infrastructure.
- Tokenization Is Only the First Step – Re‑engineering settlement, clearing, and compliance processes is the larger, more lucrative opportunity.
- Privacy Is Mandatory – Zero‑knowledge proofs, private transaction pools, and MPC wallets are becoming baseline requirements for on‑chain finance solutions.
- Etherealize’s Role – By providing validator‑as‑a‑service and privacy‑focused tooling, Etherealize aims to bridge the gap between Ethereum’s open‑source protocol and the stringent operational standards of regulated institutions.
- Regulatory Environment Is Maturing – Clearer guidance from regulators is reducing barriers to entry, but compliance‑by‑design will remain a critical differentiator.
Outlook
Ryan concluded the interview with a forward‑looking note: “If the industry can deliver the same level of trust, privacy, and speed that banks demand, Ethereum will become the default settlement layer for the next generation of financial products.” As the 2024 Devconnect conference wraps up, the consensus among participants appears to be that the era of tokenized assets is giving way to an era of tokenized processes—and that Ethereum, now PoS‑secured and privacy‑ready, is well positioned to lead the transition.
Source: https://thedefiant.io/podcasts-and-videos/podcast/ethereum-is-for-institutions-danny-ryan-says-tokenization-isn-t-enough
