UBS and Nethermind completed joint tests showing how banks can add compliance checks on top of Ethereum without changing the blockchain.
UBS, a Zurich-based bank with $6.9 trillion in invested assets, and Nethermind, an Ethereum infrastructure company, said in a June 23 press release that they completed two joint tests on Ethereum.
The tests took place in Sepolia, which is an Ethereum test network, without live transactions taking place, per the press release.
The companies said the setup lets banks apply compliance checks through the systems they operate around Ethereum, rather than through changes to the blockchain’s core architecture.
Read also: Former Ethereum Foundation Researchers Launch Ethlabs — What to Know About the New Organization
In the first test, UBS and Nethermind customized a node to implement custom compliance and risk checks even before the transactions were broadcasted. These included restricting the transactions to certain approved addresses and even certain interactions with smart contracts.
In the second test, the companies built a routing component that sends approved transaction bundles through relay services directly to selected block builders.
Transaction Checks on Ethereum
Andreas Kubli, group head of digital assets at UBS, said the work showed that banks can keep public-network access while adding institutional controls”
“The results show that institutional-grade controls and public-network interoperability can be achieved without compromising Ethereum’s openness or neutrality.”
Menawhile, Tomasz Kurowski, head of enterprise business at Nethermind, said the tests show compliance can be handled above the protocol level.
“By implementing compliance controls at the infrastructure layer, we have shown that institutional requirements can be met without compromising Ethereum’s openness or interoperability.”
The companies said they plan to keep building on the work as technology and regulation develop.
Read more: Bitmine Boosts ETH Reserve to 5.67 Million Coins — Tom Lee Sees “Crypto Spring” and Best Years Ahead
