The Evergreen Subnet, “Spruce,” has been launched with an initial cohort of institutional partners that includes T. Rowe Price Associates, WisdomTree, Wellington Management, and Cumberland. Participating institutions will be using Spruce as a testnet for a variety of applications and assets to measure the benefits of on-chain trade execution and settlement.
“around one-third of deliverable FX turnover, around $2.2 trillion, is at risk on any given day, up from $1.9 trillion in 2019.”
“Participating in the Avalanche Spruce testnet presents a valuable opportunity to deepen our understanding and analysis of smart contract technology and the potential applications of public, permissioned blockchains in financial markets,” said Blue Macellari, Head of Digital Assets Strategy, T. Rowe Price Associates.
The Spruce testnet is meant to enable buy- and sell-side institutions to engage with public blockchain infrastructure in a low-risk, low barrier-to-entry manner. Using valueless tokens allows institutional participants to experience the full functionality of Avalanche’s Subnet architecture without putting capital at risk.
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Institutional partners will use DeFi applications on Spruce to execute foreign exchange (FX) and interest rate swaps, with other areas in active research and development. Future phases of Spruce will welcome additional third-party applications, assets, and processes, including the exploration of tokenized equity and credit issuance, trading, and fund management. Institutions will be key in providing ongoing feedback about Subnet architecture, integrations, and capabilities in order to ensure a successful and scalable mainnet implementation.
“We believe tokenization and blockchain will play an important role in financial services going forward,” said Will Peck, Head of Digital Assets, WisdomTree. “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.”
Upon onboarding, institutions’ wallets are issued non-transferable tokens (NTTs) indicating they’ve passed KYC/KYB checks; in addition, their wallet addresses are embedded in an allowlist, which monitors access at the chain level. Smart contract deployers who have integrated key infrastructure and applications also undergo the onboarding process for their activity on Spruce.
In a recent research report, executives from Uniswap Labs and Circle Internet Financial cited a 2022 BIS Triennial Survey indicating that “around one-third of deliverable FX turnover, around $2.2 trillion, is at risk on any given day, up from $1.9 trillion in 2019.” Potential benefits of on-chain FX and cross-border payments include payment vs payment transactions, atomic settlement, and reduced counterparty risk.
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Said Mark Garabedian, Director, Digital Assets and Tokenization at Wellington Management: “Avalanche Subnets provide a potential settlement solution that enables financial transactions with enhanced operational efficiencies, reduced risks, and regulatory compliance without creating liquidity islands or reduced interoperability. We look forward to experimenting with this technology to determine its suitability for institutional workflows, and its potential to reduce costs thus adding value for our clients.”
Said John Wu, President of Ava Labs: “This groundbreaking collaboration creates a secure, controlled, and exciting opportunity for the world’s financial institutions. We see Spruce, and more broadly, Avalanche Evergreen subnets, as a meaningful step in exploring the possibilities of digital finance.”
Spruce is a type of Evergreen Subnet for institutional blockchain deployments. Evergreen Subnets are EVM-based chains with a permissioned validator set and a custom gas token to power transactions. Ultimately, Spruce and the Evergreen Subnets aim to address many of the issues with permissioned DeFi precluding broader institutional adoption of public blockchain infrastructure.
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