UBS has partnered with Nethermind to test how regulated financial institutions can operate on the public Ethereum network while maintaining strict compliance controls.

Through two proof-of-concept exercises, the organizations demonstrated that banks can apply governance, risk and compliance measures at the infrastructure level without altering Ethereum’s core protocol or compromising its neutrality.

The first proof of concept enabled transaction screening directly at the node level, allowing predefined compliance policies to determine which transactions could proceed, as noted by the companies.

The second focused on transaction execution, using a dedicated routing mechanism to send approved transactions through selected relay and builder infrastructure for reliable blockchain inclusion. Both solutions were successfully tested on the Sepolia network and did not involve live financial transactions.

“These proofs of concept demonstrate the value of close collaboration between UBS and Nethermind in shaping the next generation of compliant blockchain infrastructure. Together, we co-designed the approach, aligned on technical and governance requirements, and validated solutions end-to-end,” Andreas Kubli, Group Head of Digital Assets at UBS, said in a statement.

Institutional controls applied on Ethereum without altering core protocol design

According to the companies, the results suggest that the public Ethereum infrastructure can accommodate the needs of regulated institutions seeking exposure to digital assets and tokenized finance.

“By implementing compliance controls at the infrastructure layer, we have shown that institutional requirements can be met without compromising Ethereum’s openness or interoperability. These results provide a strong foundation for further joint development and broader partnership,” Tomasz Kurowski, Head of Enterprise Business at Nethermind, commented on the successful trials.

“The results show that institutional-grade controls and public-network interoperability can be achieved without compromising Ethereum’s openness or neutrality. We value Nethermind’s technical expertise and will continue to build on this work as the ecosystem evolves,” Kubli added.

UBS is evaluating expanding crypto access for private clients as it builds out its digital capabilities and develops products like tokenized deposits, according to CEO Sergio Ermotti.

The bank plans to pursue a fast-follower approach to asset tokenization over the next three to five years, balancing innovation with caution. It is also weighing a phased introduction of crypto services for affluent Swiss clients amid growing competitive pressure from JPMorgan and Morgan Stanley.