3 - 5 minute read
A group of financial market institutions, including T. Rowe Price Associates, WisdomTree, Wellington Management, and Cumberland, have joined Avalanche’s Evergreen Subnet ecosystem to explore the potential of blockchain-based foreign exchange. The subnet, called “Spruce,” has been launched to test public blockchain applications and will enable institutions to conduct forex transactions without losing capital. Over time, successful tests will pave the way for further blockchain settlement, including the exploration of tokenized equity and credit issuance, trading, and fund management.
The Spruce subnet offers compliance features to help institutions stay within the parameters of the law, and firms must first pass Know Your Customer (KYC) verifications before they can use it. Once verified, firms receive non-transferable tokens (NTTs) identifying them on the network.
Spruce is the second Avalanche Evergreen subnet launched since the protocol was released and listed on the Avalanche website. The Evergreen subnet protocol allows institutions to create customized blockchains with compliance features. It was launched on April 6, following the release of the “Evergreen” subnet. The new subnets were created to address the interoperability issues faced by previous solutions such as Corda and Hyperledger, which were not sufficient for the needs of large institutions.
Will Peck, head of digital assets at WisdomTree, believes that Spruce will be an important step in bringing greater efficiency to traditional financial transactions. He said, “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.”
According to a joint study from Uniswap and Circle in January, the cost of forex could be reduced by up to 80% by putting transactions on a blockchain network. Experts such as Ralf Kubli of the Casper Foundation have argued that tokenization may help to prevent a future financial crisis.
The implications of the new subnet on the market for forex and other forms of settlement are significant. The success of Spruce may pave the way for other financial institutions to experiment with blockchain settlement. Traders should keep an eye on developments and prepare to capitalize on opportunities that arise from the adoption of blockchain within the industry.
The launch of the Spruce subnet is a step towards more efficient and secure financial transactions. Blockchain-based foreign exchange transactions may have a significant impact on the market in the coming years, and traders should pay close attention to developments in this area.
The Bottom Line
The launch of the Spruce subnet by Avalanche has important implications for the forex market and other forms of settlement. Traders should prepare to capitalize on opportunities that arise from the adoption of blockchain within the industry. The success of Spruce may pave the way for other financial institutions to experiment with blockchain settlement.