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T. Rowe Price and WisdomTree participate in Avalanche subnet for foreign exchange testing.
Financial market companies T. Rowe Price Associates, WisdomTree, Wellington Management, and Cumberland have become part of an Avalanche (AVAX) subnet to explore the concept of blockchain-based foreign exchange, as stated in a release from the Avalanche team. The newly established subnet is named “Spruce” and is included in Avalanche’s Evergreen Subnet ecosystem.
Following last week’s announcement regarding Avalanche Evergreen, today signifies the debut of the Spruce Subnet!
Institutional partners such as @TRowePrice, @WisdomTreeFunds, @Wellington_Mgmt & @CumberlandSays will utilize Spruce to experiment with public blockchain applications. https://t.co/1KLzxcUCSB pic.twitter.com/xvaUmKO3BV— Avalanche (@Avax) April 12, 2023
The announcement indicated that institutions will initially utilize “valueless tokens” on Spruce to facilitate foreign exchange, or forex, transactions without risking capital. Interest-rate swaps will also be evaluated in the early stages. In the long term, successful trials will enable these firms to explore additional blockchain settlement initiatives, including “the investigation of tokenized equity and credit issuance, trading, and fund management.”
The announcement specified that Spruce incorporates compliance features to assist institutions in adhering to legal requirements. Firms wishing to utilize it must first complete Know Your Customer (KYC) verifications, and upon finishing this process, they are issued non-transferable tokens, or NTTs, that identify them on the network. Their wallet addresses are also whitelisted “at the chain-level” following verification.
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Will Peck, head of digital assets at WisdomTree, expressed that he views Spruce as a significant advancement in enhancing efficiency in traditional financial transactions:
We believe tokenization and blockchain will play an important role in financial services going forward. Avalanche Spruce provides an opportunity to further explore the potential efficiencies and benefits of on-chain trading and settlement with other financial institutions. We are looking forward to experimenting in this EVM-based testing environment.
On April 6, Avalanche revealed the introduction of the “Evergreen” subnet protocol, which enables institutions to develop tailored blockchains with compliance features. At that time, a representative from Ava Labs noted that these subnets were necessary because earlier solutions, such as Corda and Hyperledger, lacked sufficient interoperability for the requirements of large institutions.
Related: Deutsche Boerse, Swisscom Settle Securities with Corda and Hyperledger
Spruce is one of two Avalanche Evergreen subnets that have been launched since the protocol’s introduction and listed on the Avalanche website. Intain, an Evergreen subnet concentrating on structured finance, is the other.
A joint study released in January by Uniswap and Circle suggested that the expenses associated with forex could be decreased by as much as 80% by transferring transactions to a blockchain network. Experts like Ralf Kubli of the Casper Foundation have posited that tokenization may aid in averting a future financial crisis.
