ETH L2s give banks, exchanges, and corporations control over their networks while still connecting them to the global Ethereum ecosystem.
We discussed ETH L2s in Part 1; now, let’s explore why they matter to institutions.
Why ETH L2s Matter for Institutions
Adopting any new technology means asking tough questions: Can we control it? Is it fast enough? Can it stay private? ETH L2s answer all these from an institutional perspective.
Institutions are moving from pilots to production.@Ethereum settles; L2s scale, add privacy & customization.
New report with @Etherealize_io & @Nethermind:
🔸 Why now, what L2s are, what institutions need
🔹 How to choose & operate: settle on Ethereum, run on L2sRead more 👇 pic.twitter.com/JRod9IRC6b
— L2BEAT 💗 (@l2beat) December 4, 2025
Ownership and Control
Institutions no longer need to choose between public blockchains and private infrastructure. With Ethereum Layer 2 solutions, they can run or build their own networks. This gives them control over transaction order, data storage, and access permissions. They can align L2 operations with internal governance and ensure network-level compliance.
“We see a lot of demand for L2s from banks, fintechs and enterprises but most can’t built on a public chain due to privacy and compliance reasons”@gluk64, at the recent @EFDevcon, commenting on Ethereum’s L2 roadmap and the PMF signs of specialized chains. pic.twitter.com/IKmFYcJS4z
— ZKsync (@zksync) December 2, 2025
Running an L2 also gives institutions a performance guarantee. They get low latency and high uptime. They can earn fees and offer premium services, turning infrastructure into a revenue stream. Private ETH L2s can connect to public Ethereum for liquidity and settlement.
Privacy and Confidentiality
The trading strategies and client information should remain confidential. ETH L2s provide a permissioned environment where only authorized users can get in. Selective disclosure also enables regulators to access sensitive information without publicizing it.
Zero-knowledge proofs offer compliance verification without revealing any underlying details. Institutions get confidentiality without sacrificing transparency.
Data Availability, Storage, and Auditability
ETH L2s improve regulatory reporting and record keeping. Data availability means institutions have access to the required prior transactions. On- or off-chain storage can enable institutions to form tamper-proof records.
Cryptographic proofs also speed up audits; they use them instead of manual checks. This reduces operational and compliance risks and increases regulatory trust.
The next financial system is being built now.@Ethereum is the foundation of institutional finance.
L2s unlock scalability, privacy, & compliance – enabling institutions to deploy at scale.
We’ve teamed up with @Etherealize_io + @l2beat to explain why. 🧵 pic.twitter.com/YrqFiXJbzS
— Nethermind (@Nethermind) December 4, 2025
Cost Reduction and Revenue Opportunities
L2s reduce expenses by batching transactions to avoid high gas prices on the mainnet. L2 can make a profit from its own application, a third-party application, or a specialized application. The Blockchain becomes a profit centre rather than a cost centre.
Customizability and Composability
They let institutions tailor systems while staying connected to Ethereum. They can also establish permissions, compliance rules, and performance tuning. Meanwhile, they are also compatible with other L2s, DeFi sites, and mainnet assets. This balance enables the institutions to remain private. With this, they can access the public market when needed.
Compliance and Regulatory Alignment
The Ethereum network can incorporate compliance. On-chain identity verifies participants before they can transact. In the meantime, they also integrate with other L2s, DeFi platforms, and mainnet assets. Regulatory sandboxes in Singapore and Hong Kong give them confidence to deploy.
Real-World Examples
- J.P. Morgan is testing tokenized deposits on Base.
- Visa is using ZK proofs to improve privacy in tokenized platforms.
- Société Générale has published regulated Ethereum-based stablecoins.
These demonstrations show that ETH L2s are already driving live institutional applications.
🚨 JUST IN: JPMorgan launches deposit token JPM Coin for institutional clients on Base, enabling instant 24/7 settlements, per Bloomberg. pic.twitter.com/0KT5osZxtV
— Cointelegraph (@Cointelegraph) November 12, 2025
Choosing the Right L2
Institutions can join public L2s like Optimism or Arbitrum or build their own private networks. They can choose Optimistic rollups when it is easy or ZK rollups for private, fast finality. The choices rely on price, compliance, support, and flexibility in the long run. Most institutions will use a combination of mainnet and L2s.
The Growing ETH L2 Ecosystem
Networks like Base, Optimism, Arbitrum, Starknet, ZKsync, and Linea continue to grow. Most of them are now enabling custom AppChains and L3s. Tools such as L2BEET help institutions check activity, security, and adoption.
Conclusion
The Etherealize report shows ETH L2s are shaping the financial system. Existing institutions have already built and experimented with Ethereum and its Layer 2s. In some cases, they operate production-scale systems.
Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted risk tolerance levels of the writer/reviewers, and their risk tolerance may differ from yours. We are not responsible for any losses you may incur due to any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments, so please do your due diligence. Copyright Altcoin Buzz Pte Ltd.
