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R3 hit with new layoffs: CEO talks CBDC ‘fear-mongering’ and slams DeFi

R3 hit with new layoffs: CEO talks CBDC ‘fear-mongering’ and slams DeFi
R3 CEO David E. Rutter
  • In an exclusive interview, R3 CEO David E. Rutter defends CBDCs and says DeFi can’t replace traditional finance.
  • Contrary to many blockchain businesses, R3 has embraced centralisation, even helping several central banks with their CBDC projects.
  • But challenges mount as the company hurtles towards its tenth anniversary.
  • New layoffs, the closure of Rutter’s other blockchain company LedgerEdge, and a brewing culture war around CBDCs are just some of his challenges.

Just a short walk from the London office of blockchain technology firm R3, outside the Barbican residential complex, looms a statue of the Minotaur, and that somehow feels fitting.

Like the mythological beast, R3 is a hybrid — not entirely a crypto company nor completely a traditional finance firm, but a fusion of the two.

For nine years, R3 has laboured to make blockchain an integral part of the financial industry’s infrastructure.

While the venture doesn’t necessarily subscribe to the mission of creating an alternative financial system, it does wholeheartedly trumpet the innovative power of distributed ledger technology.

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“We’re trying to change the wiring, or the plumbing, of finance,” R3 CEO and co-founder David E. Rutter told DL News in an exclusive interview in his corner office near the London Wall, which the Romans built almost 2,000 years ago.

“It’s probably the hardest thing I’ve ever done,” Rutter said, adding that if he’d known how difficult it would be to convince banks to bet on blockchain, he wouldn’t have even tried in the first place.

And it’s getting harder. Last week, R3 announced a new round of layoffs, blaming it on “challenging macroeconomic conditions.”

Meanwhile, central bank digital currencies, or CBDCs, an area where R3 is active, have become a lightning rod, with critics likening them to tools of Orwellian mass surveillance. They’re even playing a role in the run-up to the 2024 US presidential election as Ron DeSantis, the Florida governor and Republican candidate, has vowed to outlaw them.

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NOW READ: R3 CEO says CBDCs are ‘not evil’ as Republicans clash in first primary debate

In the face of these challenges, Rutter said R3 will focus on “slimming down what we’re doing” and put its attention to “the key projects and digital currencies and digital assets that we think are going to dramatically move the needle forward.”

However, he remained optimistic. Far from recoiling from the disaster of FTX and Terra in 2022, Wall Street and the City are both embracing blockchain technology. Companies such as Societe Generale are pushing hard into the tokenisation of “real world assets” such as bonds. Apollo Global Management, the giant hedge fund, is developing blockchain for the capital markets.

And this summer, industry goliaths BlackRock, Fidelity, and Ark Investment applied to US regulators for approval to introduce exchange-traded funds based on the spot price of Bitcoin, which could significantly increase retail access to the cryptocurrency.

Now, with the cacophony of crypto launches dying down, Rutter said more firms may be willing to invest in R3′s solutions and abandon DeFi projects, which he said he struggled to see the value of.

How R3 got started

Rutter is not your typical crypto guy. In his crisp shirt and business suit, he sports the air of someone more comfortable chatting with bankers than kicking a hacky sack at Burning Man.

Back in 2013, Rutter was a CEO at Icap, the London-based interdealer that played a key role in the trading of government bonds.

Bitcoin and the promise of its underlying technology pulled at him when he left and he briefly considered investing in a crypto startup. But a three-day trip to Palo Alto convinced him not to.

He was shocked at how founders with “no understanding of how Wall Street works” could raise capital at multi-million valuations by saying outlandish things like “JPMorgan won’t be necessary in five years,” Rutter told in 2016.

But he saw a massive need to upgrade the ageing infrastructure of Wall Street.

So he started a business to improve incumbent financial systems with distributed ledger technology, or DLT. This is largely synonymous with blockchain, but DLT tends to connote the idea of a private, or permissioned, network rather than the kind of open, public one that underpins Bitcoin.

For instance, banks and other finance firms rely on central depositories that provide safe-keeping for securities such as shares, mutual funds, and bonds. While they provide a valuable service, Rutter said they also “add expense and friction to the system.” DLT, he argued, could reduce that friction.

Working with co-founders and fellow finance veterans Todd McDonald and Jesse Edwards — Rutter launched R3 in 2014.

They enlisted the help of a consortium of nine banks, including Goldman Sachs, JPMorgan, and Morgan Stanley. Those three banks left the consortium in subsequent years, but continue to support the venture, McDonald told DL News. In 2015, R3 changed from a consortium into a software company.

“The launch served as a bit of a rallying cry to banks to not only pay attention but also get involved,” McDonald said, adding that that figure grew to over 100 entities “beyond just banks” that became “part of the R3 ecosystem.”

In 2017, R3 raised $120 million in a funding round backed by 40 investors, including SBI Group, Bank of America, and Temasek, the investment company owned by the government of Singapore.

That same year, R3 launched an offering called Corda that provided software and a platform to enable financial institutions to utilise a DLT solution. As a gated network, Corda only lets people involved in a transaction see the transaction’s data, which boosts privacy, security, and transaction speed.

This was crucial, Rutter explained, because financial institutions have an obligation to protect the confidentiality of their clients. There was virtually no way Wall Street could have tapped a normal blockchain solution for clients that expect their data to be protected. It would have been a non-starter.

Describing Corda as a blockchain doesn’t sit well with Rutter, as Corda “never uses blocks.”

“A distributed application platform might be even more accurate,” he said.

Banks, it turned out, were unenthusiastic about swapping infrastructure built up over decades, even centuries, for a new and untested technology, especially one often associated with Ponzi schemes, scams, and rug pulls.

Rutter understood their trepidation, and that made his job harder.

“Think about it: if you’re going to put in new plumbing, new streets, you have to rip everything up, and then attach it to every home and every home slightly different — it’s just really, really hard,” he said.

Things may be changing. With the roar of the latest “hype cycle” dying down, “the market has really settled down and matured,” Rutter said, meaning more banks may be open to implement R3′s solutions.

He is, however, sceptical about the prospect of DeFi benefitting from the new environment.

“The regulations that guide the financial markets have evolved over hundreds of years,” Rutter said. “So the idea that we’re going to just throw that out and come up with a new DeFi system is unrealistic.”

While he didn’t reject DeFi entirely, Rutter remained unconvinced that it solves an actual problem.

“You have to really ask what the advantage of a fully decentralised marketplace is — it certainly isn’t speed of transactions,” he said.

CBDCs in the crosshairs

CBDCs are a key part of R3′s business. Over the years, the company has partnered with about a dozen central banks to help them launch digital versions of their national currencies.

In 2023 alone, it was enlisted by the United Arab Emirates and Italy to help implement those two countries’ respective CBDC visions.

There is a growing market for such products. So far, 11 CBDCs have launched around the globe, and there are 100 more in the pipeline, according to the Atlantic Council’s CBDC tracker. The council also lists 16 inactive projects and two cancelled ones.

However, as the number of projects has ballooned, so has opposition to them.

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CBDCs have become a particularly contested topic in the US where politicians such as DeSantis have called them a threat to “personal economic freedom and security” that is tantamount to “government sanctioned surveillance.”

Rutter responded to those comments by labelling them as “fear-mongering,” saying a digital dollar would not be much different from the practices governments already use to track spending to prevent money-laundering.

“CBDCs are definitely not evil,” Rutter said. “DeSantis looking for votes is good for him, but money is already digital. Central bank digital currencies take it to the next level.”

R3 hit with layoffs

The fallout from the pandemic and Russia’s illegal war in Ukraine have contributed to deep market contractions.

Crypto companies are not immune to the adverse market conditions. An estimated 30,000 crypto workers have been laid off since April 2022, including at pacesetters such as Coinbase, and Gemini.

Now, R3 has joined them. Last week it announced new staff cuts in a blog, blaming the market. The announcement came after DL News interviewed Rutter in late August.

The company did not confirm how many workers lost their jobs, but said “that R3 remains in a robust position.”

Spokespeople declined to answer questions about R3′s profitability or how worried clients and investors should be that the company may face the same fate as LedgerEdge, Rutter’s other business blockchain company, which filed for bankruptcy in August.

Leaving the R3 office, I walked past the Minotaur again. Watching the kneeling man-beast, I was unsure whether it was rising up, or crumbling under its own weight.

Eric Johansson is DL News’ London-based news editor. Do you have a tip on CBDCs, the politics of crypto or another exciting story? Send tips at