Financial Markets Firms T. Rowe Price Associates, WisdomTree, Wellington Management and Cumberland Join Avalanche. According to an announcement from the Avalanche team, the subnet will test the idea of blockchain-based forex trading. The new subnet is called "Spruce" and is part of the Avalanche Evergreen Subnet ecosystem.
According to the announcement, institutions will initially use "valueless tokens" on Spruce to ensure they can trade foreign exchange without losing their funds. Interest rate swaps will also be tested at an early stage. In the longer term, a successful test will enable the firms to further experiment with blockchain settlements, including “exploring tokenized equity and credit issuance, trading and fund management.”
Spruce provides compliance capabilities to help institutions stay within the law, the announcement said. Companies wanting to use it must first pass know-your-customer (KYC) verification, and once they complete the process, they receive non-transferable tokens, or NTT, that identify them on the network. Their wallet addresses are also whitelisted at the "chain level" after verification.
Will Peck, Head of Digital Assets at WisdomTree, stated that he believes Spruce will be an important step in bringing greater efficiency to traditional financial transactions:
“We believe that tokenization and blockchain will play an important role in the future of financial services. Avalanche Spruce presents an opportunity to further explore the potential efficiencies and benefits of on-chain transactions and settlements with other financial institutions. We look forward to experiment in this EVM-based test environment."
On April 6, Avalanche announced the launch of its “Evergreen” subnet protocol, which allows institutions to create custom blockchains with compliance features. At the time, an Ava Labs representative stated that these subnets were needed because previous solutions, such as Corda and Hyperledger, were not interoperable enough for large institutions. Spruce is one of two Avalanche Evergreen subnets launched since the protocol was published and listed on the Avalanche website. Intain is another Evergreen subnet focused on structured finance.
A joint study by Uniswap and Circle in January argued that foreign exchange costs could be reduced by as much as 80% by placing transactions on a blockchain network. Experts such as Ralf Kubli of the Casper Foundation believe that tokenization could help prevent future financial crises.
