R3 CEV is a New York-based financial innovation firm that Mike Hearn joined as the chief platform officer several months prior to his announcement that Bitcoin was a “failed experiment.” R3 focuses on distributed ledger technology and has partnered with 42 banks around the world, such as Goldman Sachs, HSBC and Toronto Dominion, over the past year to create a blockchain consortium of financial institutions.

R3 CEV believes in the value of a private “permissioned” blockchain, rather than a public “permissionless” blockchain. The entire world has access to a permissionless ledger, and it requires a digital asset, such as bitcoin, to operate as a financial incentive to encourage people and businesses to contribute their computing power to secure the network. This also deters fraud as the network grows larger. Only a select group of trusted parties is required to maintain a permissioned blockchain.

Since its foundation, R3 has operated mostly outside of public scrutiny. In an interview with Coindesk this past summer, founder David Rutter and partner Todd McDonald explained that “R3 CEV has been playing a quiet yet concerted game to bring blockchain technology to the world’s largest banks and financial institutions.”

Recently though, R3 has emerged from the shadows, and company leaders have begun to discuss their plan publically and how it affects bitcoin and the financial services industry. Rutter announced in a press release that “partnering with a broad range of institutions has always been central to our strategy [and] securing the backing of 42 of the world’s leading banks demonstrates the level of interest in our initiative, and we now look forward to exploring collaboration with non-bank institutions and expanding our already diverse group.”

On January 14th The Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution hosted a livecast with a group that included Charley Cooper, the managing partner of business development and marketing at R3 CEV, in what was probably the most thorough explanation of their perspective on the market.

Cooper explained that the focus at R3 has shifted over the past couple years to distributed ledger technology after discussions with both Wall Street bankers as well as technologists. Wall Street bankers have become interested in understanding blockchain technology, and technologists, the ones building the software, need to familiarize themselves with the financial services market anti-money laundering laws and know-your-customer regulations.

Put simply by Cooper in the webcast, “there are amazing technology companies who are making really cool stuff that is totally irrelevant to what the financial services market is doing.” Financial services employees operate in one of the most highly regulated markets in the world, regulations that technologists must understand to ensure their technology has a real-life application.

Cooper adds that there are several instances in history where banking consortiums have come together to successfully improve the banking experience, such as Markit Tradeweb, FXall and E Speed Broker Tech. In an interview with American Banker, he explains that R3 CEV is building technology to custom fit the needs of the banking consortium, rather than many financial technology companies that are building software before showing banks, only to find their model doesn’t comply with regulations.

The belief at R3 is that innovation is more possible once all the market players are on the same team, rather than the decentralized and open source nature of innovation in the bitcoin blockchain community. In addition, both Cooper and Rutter believe the bitcoin blockchain is not suitable for use on the scale of the financial services market due to its limited block size, the complexity of transactions and regulators not approving of anonymous nodes varying the network. Cooper admitted, though, he might change his mind if regulators began to agree with a permissionless blockchain system.

On January 20th, R3 announced the launch of a private distributed ledger that connects 11 member banks using Ethereum technology and hosted on a virtual private network in Microsoft Azure’s Blockchain as a Service. According to International Business Times, the banks to join the peer-to-peer network first include Barclays, BMO Financial Group, Credit Suisse, Commonwealth Bank of Australia, HSBC, Natixis, Royal Bank of Scotland, TD Bank, UBS, UniCredit and Wells Fargo. The successful completion of this network marks an important step for blockchain technology; it is now being used by the world’s premier financial institutions.

Even if the R3 team is right in that a private network is the best way to stimulate innovation in the financial services industry, there are many applications for Bitcoin and the Bitcoin blockchain in industries outside of financial services. If either Bitcoins’ permissionless blockchain or the permissioned blockchain of the banking consortium picks up more traction in 2016, it will likely have a positive effect on the entire financial technology sector.

This article has been updated to correct the timeline and show that Hearn joined R3 CEV months before his post about Bitcoin’s failure.

This article has been edited to correct the spelling of firms Tradeweb and Markit