Grygo is the chief content officer for FTF & FTF News.
While the hype surrounding blockchain technology cooled long ago, the hope remains that it will yield trading technology breakthroughs.
With that hope in mind, T. Rowe Price Associates, WisdomTree, Wellington Management, and Cumberland are “an initial cohort” of financial services firms participating in a test of public blockchain infrastructure. They will explore the benefits of on-chain trade execution and settlement for applications and assets, officials say.
The cohort will be using a testnet, which “is an instance of a blockchain powered by the same or a newer version of the underlying software, to be used for testing and experimentation without risk to real funds or the main chain,” according to a quick definition found via Wikipedia.
In particular, the participants will be working with the “Spruce” subnet/testnet from the Evergreen division of Avalanche, a smart contracts platform company that offers its consensus protocol, a subnet infrastructure, and a HyperSDK toolkit to launch customized blockchain solutions.
“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,” according to Avalanche officials.
In a prepared statement, Mark Garabedian, director, digital assets and tokenization at Wellington Management, says the Avalanche Subnets represent “a potential settlement solution that enables financial transactions with enhanced operational efficiencies, reduced risks, and regulatory compliance without creating liquidity islands or reduced interoperability.”
For the testnet experiments, “institutions’ wallets are issued non-transferable tokens (NTTs) indicating they’ve passed KYC/KYB checks; in addition, their wallet addresses are embedded in an allow-list, 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,” officials say.
“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,” says Blue Macellari, head of digital assets strategy at T. Rowe Price Associates in a prepared statement.
“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,” according to Avalanche Evergreen officials.
“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,” according to Avalanche Evergreen.
“We believe tokenization and blockchain will play an important role in financial services going forward,” said Will Peck, head of digital assets at WisdomTree in a statement.
“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 [Ethereum Virtual Machine] testing environment,” Peck says.
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