INSTITUTIONAL | Swiss Banking Giant Successfully Tests Compliance Controls on the Ethereum Infrastructure Layer

UBS has completed a series of joint proof-of-concept projects with Ethereum infrastructure developer, Nethermind, demonstrating that regulated financial institutions can meet stringent compliance requirements while operating on the public Ethereum blockchain, a milestone that could accelerate institutional adoption of public blockchain infrastructure.

The Swiss banking giant said the tests showed compliance controls can be implemented at the infrastructure layer without altering Ethereum’s underlying protocol preserving the network’s permissionless nature while satisfying operational and regulatory obligations expected of large financial institutions.

The experiments focused on enforcing compliance at two critical stages of Ethereum transaction broadcasting:

• First, they configured an Ethereum node to apply customizable compliance policies and risk rules, including restricting transactions to approved wallet addresses and preventing interactions with selected smart contracts.

• Second, they developed an infrastructure component that routes approved transaction bundles through relay services directly to selected block builders, helping ensure transactions are reliably included on-chain.

Both proofs of concept were successfully tested on Ethereum’s Sepolia testnet and did not involve live client transactions.

Andreas Kubli, Group Head of Digital Assets at UBS, said:

“At UBS, we are building the core infrastructure to support tokenized assets and digital assets, always guided by a client-led and responsible approach.

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. 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.”

Tomasz Kurowski, Head of Enterprise Business at Nethermind, said:

“These two proofs of concept reflect Nethermind’s institutional strategy of delivering enterprise-grade Ethereum infrastructure, built on deep protocol and client expertise.

By implementing compliance controls at the infrastructure layer, we have shown that institutional requirements can be met without compromising Ethereum’s openness or interoperability. UBS has been a great partner throughout this work, pragmatic, thoughtful, and clearly at the forefront of institutional digital asset adoption.

These results provide a strong foundation for further joint development and broader partnership.”

The work reflects a growing shift among global financial institutions away from private blockchain experiments toward using public blockchain infrastructure with institution-specific compliance controls layered on top.

For years, banks viewed permissionless networks as incompatible with regulatory expectations around transaction monitoring, sanctions screening and operational governance. UBS’ latest research suggests those controls can increasingly be implemented without fragmenting the underlying blockchain or sacrificing interoperability with the broader Ethereum ecosystem.

The development comes as tokenized assets continue moving from pilot programs toward production deployments. Large financial institutions including UBS have expanded investments in tokenized securities, digital cash infrastructure, and on-chain settlement systems with Ethereum emerging as one of the preferred settlement layers for institutional tokenization initiatives.

The announcement also reflects a broader trend in financial infrastructure:

Trust is shifting from modifying blockchain protocols to securing the systems built around them.

As banks integrate AI-powered automation into transaction routing, compliance monitoring and operational workflows, cybersecurity researchers increasingly argue that AI agents should be treated as untrusted systems by default. Rather than granting autonomous software broad authority, institutions are being encouraged to apply zero-trust principles, including

• continuous verification,
• least-privilege access,
• human oversight for high-risk actions and
• cryptographic validation of outputs

to reduce operational and security risks.

That philosophy closely mirrors UBS’ latest Ethereum work.

Instead of assuming public infrastructure is inherently compliant or that autonomous software can be fully trusted, the bank is demonstrating that compliance, governance and security should be enforced through independently verifiable infrastructure layers, a design increasingly viewed as essential as blockchain networks and AI systems become core components of institutional financial markets.

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