Hyperledger Fabric has long been a cornerstone of enterprise blockchain, effectively addressing the deficiencies and governance challenges of public blockchain systems. Designed for modularity, scalability, and effective governance, it laid the groundwork for enterprise blockchain applications where trust, compliance, and performance are paramount.

As the financial landscape undergoes rapid transformation through the tokenization of assets—ranging from central bank digital currencies (CBDCs) and stablecoins to tokenized securities and deposits—Hyperledger Fabric is evolving as well. A critical leap forward is underway with a set of enhancements, collectively dubbed Fabric-X, driven by key code contributions from the IBM Research team. These updates are designed to equip Fabric with the capabilities needed to support the next generation of regulated digital assets at scale.

Read on for the details of what exists, what is required, and what is coming in Hyperledger Fabric’s support for digital assets….

Critical foundational features of Hyperledger Fabric

Hyperledger Fabric, an open-source project under the Linux Foundation’s LF Decentralized Trust umbrella, was designed to provide a modular and scalable framework for enterprise blockchain applications. As such, many of its principles of operation are already relevant for regulated digital assets and currency use cases. 

Below are defining features of Fabric for supporting enterprise deployments that are also relevant for financial applications:

Feature 1: Identity & access management 

Unlike public blockchains, Fabric operates on a permissioned network, ensuring that all participants are known and have been given permission to be part of the system (i.e., they are trusted). On a technical level, this means that network participants are granted identities that allow them to transact on the system and ensure accountability of their actions within it. Identities in Fabric also serve resource access management purposes. Fabric participants can be privileged (i.e., allowed to deploy their own smart contracts) and evolve them as per their compliance or functional needs. Or they can simply be consumers of an application (i.e., allowed to only trigger the execution of smart contracts via transactions that they submit into the system). Depending on their stake in the system, participants may be involved in the transactional ledger of the system (i.e., the consensus layer that decides the order in which transactions appear on the ledger). Notice, that while the order of transactions can have an impact on the system’s state, it cannot modify the logic that each smart contract involves or the way that is being executed.

Feature 2: Modular governance and sovereign smart contracts 

A core innovation of Fabric is its governance flexibility. While the network as a whole operates under a consensus protocol (e.g., SmartBFT), each smart contract is governed independently by its stakeholders. Other system participants can always inspect that transactions are executed in accordance with each smart contract’s trust assumptions. This model provides a high degree of transparency and accountability, crucial for enterprise applications where regulatory compliance (including data protection/localization regulation) is paramount.

Feature 3: Modular and scalable architecture

Fabric adopts a pre-order computation mechanism, ensuring tailored security, optimal efficiency and horizontal scalability of smart contract execution. More specifically, the system's architecture assumes three phases in transaction processing:

I. Computation of Smart Contracts: Fabric allows for the execution of smart contracts outside of the critical path
  A. in a horizontally scalable manner, 
  B. in an operationally resilient manner, to avoid single points of failure or trust, and
  C. by a set of parties trusted by the smart contract (its stakeholders).

This approach strengthens security and compliance, enhancing efficiency, and reducing end-to-end latency. 

II. Modular Consensus Algorithm: The framework supports pluggable consensus algorithms, enabling organizations to choose the consensus mechanism that best fits their needs and trust assumptions.
III. Ledger state commitment: This ensures that only transactions that have been processed by authorized parties in phase I and consume fresh state will alter the system’s state.

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By providing sovereignty, accountability, modularity and scalability, Hyperledger Fabric has laid out a strong foundation for digital assets, across regulatory domains and evolving financial ecosystems. That said, there are more optimizations that can take place to optimally support digital assets at scale.

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Core requirements for Regulated Digital Assets

By digital assets, we mean the digitization of the lifecycle of business assets (such as money, bonds, or equities) on programmable, transparent platforms like Distributed Ledger Technologies (DLTs). Assets tied to regulated instruments, such as central bank money, commercial bank deposits, or securities, are regulated digital assets, which come with their own set of unique challenges. While DLTs have rapidly advanced in the last few years, most still fall short in several critical areas when applied to regulated digital assets:

• Governance: Effective governance is crucial for regulated digital assets, ensuring accountable decision-making, and compliance with evolving regulations and agreed-upon standards. Such governance models become particularly challenging to accommodate in public DLTs, due to their open, decentralized nature. It brings milder challenges in permissioned DLTs with operations that span across multiple jurisdictions, trust domains, or markets. Modular governance plays an important role in meeting this requirement. 
• Compliance: Adhering to regulation can become quite complex, especially when a digital asset system spreads across multiple jurisdictions. Such a system must meet the needs of multiple legal frameworks, each with varying requirements around data privacy and localization, financial reporting and controls, and cybersecurity standards (e.g., post-quantum readiness). Most DLT platforms were not designed with this level of policy flexibility or isolation in mind.
• Interoperability and underlying ledger agnosticism: As digital assets proliferate, it becomes clear that no single ledger can rule them all. Instead, we are moving towards multi-layered, interoperable digital asset systems where the application layer dominates in importance, and applications remain agnostic of the underlying DLT platform. It is therefore expected that interoperation standards will govern cross-application communication or enable one application to leverage another (composability). Flexibility in the programming model and smart contract orchestration becomes, therefore, critical.  
• Performance and scalability: Digital asset systems need to scale—not only to support retail use cases (which may require tens of thousands of TPS)—but also to allow seamless expansion across asset types and geographic domains. Unfortunately, many DLT platforms still struggle to handle high transaction volumes efficiently, while ensuring a single system of record:
  • Smart contract execution in the critical path often becomes a bottleneck
  • As more applications run on the same network, performance degrades
• Privacy and accountability: Supporting transactional privacy for parties operating the ledger (e.g., smart contract or consensus stakeholders), while ensuring integrity of the transaction processing operations (e.g., account holders do not overspend their balances) and non-repudiation can be challenging. It is typically supported either with the use of trusted execution environments that contain sensitive data within the limits of hardware enclaves, or by using advanced cryptography. While the usage of TEEs is typically accompanied by (blind) trust on the hardware manufacturers and has been shown in the past to be susceptible to a variety of attacks, both alternatives come with complexity and computation overhead. Without proper separation of duties in system architecture, these privacy-enhancing techniques can drag performance down to unusable levels.

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Regulated digital assets demand a DLT framework that combines strong governance, jurisdictional compliance, scalability, interoperability, and privacy—capabilities often missing in traditional DLTs.

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Addressing the requirements: Hyperledger Fabric Next Generation (Fabric-X)

To tailor Hyperledger Fabric to be a scalable, flexible, and secure platform for regulated digital assets, numerous new and existing development efforts are coming together to make up Fabric-X, a digital asset-specific implementation of Fabric. Much of this work has been underway at IBM Research over the last couple of years and will be contributed to LF Decentralized Trust as part of the Hyperledger Fabric code base. 

Fabric-X builds on the core principles of Hyperledger Fabric—sovereign, horizontally scalable smart contract execution and a modular, agile architecture—making it well-suited to meet the governance and compliance needs of regulated digital assets. Beyond this foundation, Fabric-X introduces powerful new capabilities designed specifically to optimize and scale digital asset solutions.

Capability 1: Flexible programming model

Fabric-X comes with a programming model that provides application developers with flexibility in orchestrating cross-participant or cross-network messages during smart contract execution. This enables smart contracts to operate not only in the traditional deterministic model—where execution depends solely on the ledger state and input parameters—but also to incorporate external lookups, integrate sign-offs from other application components, and embed custom logic tailored to diverse regulatory frameworks. Such a programming model lays the groundwork for regulatory compliance to be addressed either at the application layer or within the underlying DLT platform itself. Early versions of this capability can be found in the Fabric Smart Client lab repository1 .

Capability 2: Scalable Byzantine Fault Tolerant consensus support

While Fabric has long supported pluggable consensus mechanisms, native support for Byzantine Fault Tolerance (BFT) has only emerged in recent years. BFTbrings increased operational resilience, yet often falls short on performance. Fabric-X addresses this with the integration of the ARMA consensus protocol, delivering scalable, BFT-grade consensus with built-in censorship resistance. ARMA achieves transaction throughputs on the order of 100,000 TPS on commodity hardware, assuming standard transaction formats (e.g., two inputs, two outputs). This makes it suitable for demanding digital asset workloads requiring both robustness and speed. 

Capability 3: Parallel transaction processing 

Fabric-X introduces a redesigned ledger state commitment mechanism (Transaction Processing Phase III), leveraging established distributed systems techniques to significantly boost parallelism in the transaction processing pipeline. This architectural improvement enables throughput exceeding 100,000 TPS on commodity hardware, marking a 100x performance increase over previous Fabric versions. This performance leap supports even retail-scale transaction volumes. It also makes Fabric-X a powerful foundation for a wide range of regulated liability or settlement networks, positioning it as a versatile engine for current and future digital asset systems.

Capability 4: Advanced cryptography and Self Sovereign Identity

Fabric-X retains Fabric’s foundational principle of separating application logic (smart contracts) from the underlying consensus and ledger layers—supporting a modular, general-purpose DLT architecture. Expanding on this, Fabric-X introduces native support for advanced cryptographic frameworks, such as Zero-Knowledge Proofs, to enable multiple levels of privacy in digital asset operations. These features are delivered through a dedicated labs initiative: the Fabric Token SDK.

At the heart of Fabric Token SDK sits an identity layer that extends and optimizes Self-Sovereign Identity (SSI) protocols for digital asset use cases like ownership and authorization. Originally central to Know-Your-Customer (KYC) frameworks, SSI has been enhanced with cryptographic bridges that allow users to prove asset ownership in a privacy-preserving, accountable, and audit-compliant way. This layer brings powerful compliance capabilities to regulated digital asset systems—without sacrificing user confidentiality

What do these new capabilities give us?

The introduction of Highly Scalable Byzantine Fault Tolerant Consensus (Capability 2) and High parallelism in Transaction Processing (Capability 3) position Fabric-X as the sole DLT that can process transactions at a rate of hundreds of thousands per second, with integrated operational resilience at each stage of transaction processing, and a single system of record acting as the source of truth.

The Privacy and Accountability capabilities (Capability 4) lay the groundwork for robust compliance--including data protection, post-quantum readiness, and auditability.  When integrated with the flexible programming model (Capability 1) and Fabric’s foundational principles around modular governance and sovereign smart contracts, Fabric-X emerges as a regulation-ready platform for next-generation digital asset systems.

Learn more and help us build Fabric-X

If you’re eager to dive deeper into what’s coming with Fabric-X, you can explore the theoretical foundations of Fabric-X and follow ongoing code development in the Hyperledger Fabric GitHub. The first release is expected to land in the Hyperleger Fabric repository by the end of May 2025. A webinar introducing Fabric-X is planned for 7AM PT/10 AM ET/4PM CET/7:30 PM IST on June 11. 

IBM Research is a leading contributor to Fabric-X, and IBM remains fully committed to advancing the open-source ecosystem—ensuring that Fabric-X evolves to meet the demanding requirements of regulated digital asset and digital currency systems worldwide.

We invite you to get involved in this work and the Hyperledger Fabric community. To contribute to the open development of Fabric-X, find us on Discord or join our community calls.

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 1. Notice, that Fabric Smart Client already supports connections to Hyperledger Fabric. However, its use is only possible in conjunction with the official Fabric Client SDK, as smart contract deployment and other administrative operations of Fabric are tied to the latter and to the Fabric Peer.