(Bloomberg) -- R3, the blockchain company backed by investors including Bank of America Corp. and Intel Corp., fired just over a fifth of its workforce last week as it seeks to preserve cash to weather an industry downturn, people with knowledge of the matter said.
The New York-based company, one of the earliest startups to focus on developing blockchain-based systems for banks and other financial firms, said in a Sept. 11 blog post that it was reducing headcount, without giving figures. R3 eliminated jobs globally across different functions, the people said, asking not to be named discussing private information.
While R3 has had success recently attracting potential new business working for central banks on digital currencies, some projects in areas like insurance and trade finance haven’t developed as planned, leading to lost revenue, the people said.
Banks and other traditional financial institutions have been experimenting with blockchain technology for almost a decade, seeking to streamline some of their processes and cut costs. Yet adoption has been slow and the industry has yet to reap any large-scale benefits from the efforts. That’s led some critics to question whether crypto’s underlying technology has any significant utility on Wall Street.
“After careful consideration of the macroeconomic environment and commercial landscape, we’ve decided to make some changes at R3 to ensure we respond where demand is strongest but also to maintain a strong operating and financial position,” the company said in a statement to Bloomberg News. “A decision like this is never easy to make.”
The headwinds facing blockchain startups have been exacerbated by a broad slump in the cryptocurrency sector that’s seen venture-capital funding dry up. Global investment in digital-asset firms plunged 76% in the second quarter from a year earlier, according to PitchBook. As a result, a wide array of companies have had to tighten their belts.
Founded in 2015, R3 initially led a consortium of large banks focused on building blockchain systems to run some of the most complex processes. Some initial members including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley left the group as R3 sought external funding starting in 2016.
R3 raised $107 million in May 2017 from more than 40 institutions — including blue-chip names like Barclays Plc, UBS Group AG and Wells Fargo & Co. At the time, it was one of the biggest funding rounds for a blockchain company.
While blockchain adoption in finance has been slower than expected, there’s been some progress, and large firms have continued to express interest in areas such as tokenizing traditional financial assets. JPMorgan in June expanded its blockchain-based payments platform to allow corporate clients to use euros, and is also exploring deposit tokens.
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