UBS and blockchain engineering firm Nethermind have successfully completed two proofs of concept designed to assess whether the public Ethereum network can meet the operational and regulatory requirements of financial institutions, they reported on Tuesday.

According to the two partners, the projects represent an important milestone in making public blockchain infrastructure more accessible to heavily regulated banks and financial organizations.

At the heart of the initiative was the question of how compliance requirements can be enforced without altering the underlying Ethereum protocol. The tests demonstrated that banks can implement compliance controls through the systems they operate on top of Ethereum while preserving the openness and neutrality of the network itself. This approach maintains compatibility with the broader Ethereum ecosystem while addressing the regulatory expectations of large financial institutions.

Compliance Controls at Two Critical Stages

Specifically, UBS and Nethermind developed solutions covering two key stages of transaction processing.

First, they configured an Ethereum node to apply customizable compliance and risk controls, including restrictions that limit transactions to pre-approved wallet addresses and block certain smart-contract interactions.

Second, they developed a component that routes approved transaction bundles through relay services directly to selected builders, ensuring reliable inclusion on the blockchain.

The tests were conducted on Ethereum’s Sepolia test network. According to the companies, compliant transactions were consistently processed and recorded on the blockchain. No live client transactions were involved.

Focus on Tokenized Assets

«We are building the core infrastructure to support tokenized assets and digital assets, always guided by a client-led and responsible approach,» said Andreas Kubli, Group Head of Digital Assets at UBS.

The proofs of concept demonstrated that institutional-grade controls and interoperability with public blockchain networks can coexist without compromising Ethereum’s openness and neutrality, he added.

Nethermind also described the collaboration as a significant milestone. The results show that institutional requirements can be implemented at the infrastructure layer without restricting the openness or interoperability of the network, according to Tomasz Kurowski, Head of Enterprise Business at Nethermind.

A Step Toward Institutional Blockchain Adoption

The two firms plan to build on the work as both technology and regulation continue to evolve.

For UBS, the initiative forms part of a broader strategy to expand its capabilities in digital and tokenized assets. At the same time, the project highlights how public blockchain networks could become increasingly relevant for traditional financial institutions, provided that regulatory and compliance requirements can be met.

The collaboration also underscores a growing trend within the financial industry: rather than building isolated private blockchain systems, institutions are increasingly exploring ways to leverage public networks while maintaining the governance, risk-management, and compliance standards required in regulated markets.