Financial market firms T. Rowe Price Associates, WisdomTree, Wellington Management and Cumberland have joined an Avalanche subnet (AVAX) to test the idea of blockchain-based forex trading, according to an announcement 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 the 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
— 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. In the long term, the success of the tests will allow these companies to experiment with new settlement attempts on the blockchain, including “exploring the issuance, trading and management of funds of shares and tokenized credits.”
The announcement says that Spruce offers compliance features to help keep entities within the parameters of the law. Businesses that want to use it must first pass Know Your Customer (KYC) verifications, and once this process is complete, they receive non-transferable tokens, or NTTs, that identify them on the network. Your wallet addresses are also whitelisted “at the chain level” upon verification.
Will Peck, head of digital assets at WisdomTree, said 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 financial services in the future. Avalanche Spruce offers the 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 environment. EVM-Based Testing”.
On April 6, Avalanche announced the launch of the “Evergreen” subnet protocol, which allows institutions to create custom blockchain networks 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.
Spruce is one of two Avalanche Evergreen subnets launched since the protocol was published and listed on the Avalanche website. Intain, an Evergreen subnet focused on structured finance, is the other.
A joint study conducted in January by Uniswap and Circle claimed that the cost of sending remittances could be reduced by up to 80% if transactions were made on a blockchain network. Experts like Ralf Kubli of the Casper Foundation have argued that tokenization can help prevent a future financial crisis.
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