T. Rowe to Test Avalanche Blockchain in Renewed Push on Wall Street

Muyao Shen, Bloomberg News

(Bloomberg) -- T. Rowe Price Associates is among a group of Wall Street firms to test drive a new version of the Avalanche blockchain in a renewed push to explore how the technology could make financial transactions more efficient.

The firm, along with Cumberland, WisdomTree Inc. and Wellington Management Group LLC, will start experimenting with financial trade execution and settlement on the blockchain with a new application called Spruce, according to a press release. The moves follow similar ones by KKR & Co. Inc. and Apollo Global Management Inc., which have put a portion of their funds on blockchains, and JPMorgan Chase & Co., which executed its first public blockchain trade last year.

“This is an opportunity for us to really begin to explore ... in a super low-risk environment where there’s no capital at risk,” Blue Macellari, head of digital assets strategy at T. Rowe Price, said in an interview. “DeFi, as it currently exists, there are a lot of obstacles to institutional participation” including compliance, she said.

The partnered firms plan to test Spruce’s valueless token system on foreign exchange and interest rate swaps, which could have potential cost savings and reduced risks associated with decentralized finance, known as DeFi.

A report previously by Uniswap Labs and USD Coin stablecoin issuer Circle said that moving the $7.2 trillion global currency market onto blockchain would cut the cost of global remittances by 80% and eliminate settlement risks.

“The tokens are not of a value, but it allows both us to understand the regulatory and the financial requirements to do transactions on chain,” said John Wu, president of Ava Labs, the main developer behind Avalanche, in an interview. Spruce is enabling everyone in “regulated buy- and sell-side institutions” to “basically experiment with on-chain finance.”

Within Spruce’s “testnet” version, financial institutions’ digital wallets will receive non-transferable tokens that prove they have passed verification checks such as the Know Your Customer process, according to the release.

Spruce is Ava Labs’ latest attempt to provide institutions tools for custom-built blockchain networks as a part of Avalanche’s Evergreen subnet, which is like a smaller version of Avalanche’s main blockchain. The purpose of the Evergreen network is to help institutions overcome some of the challenges in adopting blockchain technology, particularly in the realm of decentralized finance.

--With assistance from Yueqi Yang.