Financial market firms T. Rowe Price Associates, WisdomTree, Wellington Management and Cumberland have joined Avalanche (AVAX) subnet to test the idea of โโblockchain-based currency exchange, according to a advertisement from the Avalanche team. The new subnet is called "Spruce" and is part of Avalanche's Evergreen Subnet ecosystem.
Following last week's Avalanche Evergreen announcement, today marks the launch of Spruce Subnet!
Institutional partners, including @TRowePrice, @WisdomTreeFunds, @Wellington_Mgmt & @CumberlandSays will use Spruce to test public blockchain applications. https://t.co/1KLzxcUCSB pic.twitter.com/xvaUmKO3BV
โ Avalanche (@Avax) April 12, 2023
According to the announcement, institutions will initially use "worthless tokens" on Spruce to ensure they can transact forex without losing capital. Interest rate swaps will also be tested from the start. In the long term, successful tests will allow these firms to experiment with further blockchain settlement attempts, including "exploring tokenized equity and credit issuance, trading, and fund management."
The announcement said that Spruce offers compliance features to help keep institutions within the parameters of the law. Businesses that want to use it must first pass Know Your Customer (KYC) verifications, and once they complete this process, they receive non-transferable tokens, or NTTs, which identify them on the network. Your wallet addresses are also whitelisted "at the chain level" after verification.
Will Peck, WisdomTree's head of digital assets, said he believes Spruce will be an important step in bringing greater efficiency to traditional financial transactions:
We believe that tokenization and the blockchain will play an important role in the future of financial services. Avalanche Spruce provides an opportunity to further explore the potential efficiencies and benefits of on-chain trading and settlement with other financial institutions. We look forward to experimenting in this EVM-based test environment.
On April 6, Avalanche announced the launch of the "Evergreen" subnet protocol, which allows institutions to create custom blockchains with compliance features. At the time, an Ava Labs representative said these subnets were necessary because previous solutions like Corda and Hyperledger were not interoperable enough for the needs of large institutions.
Related: Deutsche Boerse and Swisscom settle securities with Corda and Hyperledger
Spruce is one of two Avalanche Evergreen subnets launched since the protocol launched and is listed on the Avalanche website. Intain, an Evergreen subnet focused on structured finance, is the other.
A joint January study by Uniswap and Circle argued that the the cost of forex could be reduced up to 80% placing transactions on a blockchain network. Experts such as Ralf Kubli of the Casper Foundation have argued that tokenization can help prevent a future financial crisis.
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