UBS and Nethermind have successfully completed two proofs of concept on Ethereum’s Sepolia testnet, demonstrating that a public, permissionless network can meet the compliance and operational requirements of regulated financial institutions. The trials tested how banks and asset managers can apply strong compliance controls using customized infrastructure without altering Ethereum’s core protocol.
The first proof of concept used a custom Ethereum node that enforced compliance and risk rules on outgoing transactions before they reached the network. These rules could restrict transfers to approved wallet addresses or block specific smart contract interactions based on internal policies. This approach gives institutions direct control through their own infrastructure while keeping the base layer open and unchanged.
The second proof of concept focused on transaction routing toward block production. UBS and Nethermind built a tool that bundles approved transactions and routes them through relay services to selected block builders. This allows institutions to manage not just whether a transaction is allowed, but also how approved activity reaches the blockchain under predictable operational conditions.
Both tests ran end-to-end on Sepolia without live funds or mainnet activity. Andreas Kubli, UBS Group Head of Digital Assets, emphasized that institutional-grade controls and public-network interoperability can be achieved without compromising Ethereum’s openness or neutrality. The results strengthen Ethereum’s case for tokenization, settlement, and digital asset services, suggesting regulated firms may not need permissioned chains for every use case.
