U.K.-based financial services firm Tokenovate has partnered with fellow Brits ZERO13 to successfully execute the world’s first smart legal contract for voluntary carbon credit (VCC) derivatives trades referencing the 2022 ISDA Verified Carbon Credit Transactions Definitions.
With the World Meteorological Organization increasingly convinced that that the planet will exceed the Paris Agreement’s 1.5°C warming threshold within the next five years, any and all actions to reduce carbon emissions are imperative. VCC trades are a crucial part of the efforts to achieving environmental and energy transition goals with the ultimate aim of getting to Net Zero.
Tokenovate’s founder/CEO Richard Baker hailed this new partnership, saying it “will improve lifecycle event management and increase fidelity of derivative trading immensely. Our collaboration with ZERO13 is an important first step and significant milestone in bringing VCC’s to market using BSV blockchain-based smart legal contracts.”
Tokenovate provides distributed financial market infrastructure (dFMI) enabling programmatic lifecycle event management of the pre-trade to post-trade workflow for OTC- and exchange-traded derivatives. ZERO13, a recently-launched GMEX Group initiative, provides a digital climate fintech aggregation ecosystem.
The BSV-based smart contract enabling execution and settlement of VCC trades works by integrating Tokenovate’s dFMI into ZERO13’s hub. The latter is a distributed orchestration layer connecting carbon participants, including exchanges, registries, custodians and ESG project owners globally for supply verification, transparent pricing and real-time settlement using APIs.
GMEX/ZERO13 CEO Hirander Misra said the smart contracts employ “a globally recognized standard, trusted by institutions and corporates across the world, to help enable liquidity growth in VCC markets digitally and flexibly map it to address buyers’ criteria.”
The innovative contract’s counterparty was the Bio-CNG Project AJS Fuels in Savli, Gujarat, and their trades were conducted on the Seychelles-licensed Securities, Commodities and Derivatives Exchange (SECDEX). ZERO13’s hub connected SECDEX to the Verdana Eco-Consortium, which provides its digital Measurement, Reporting, Verification (dMRV) engine coupled with equity partner Eco-Registry’s carbon registry services.
ISDA CEO Scott O’Malia applauded the announcement, saying “digitization of derivatives markets will significantly improve efficiency and set the foundations for growth at scale. The voluntary carbon market can play an important role in channelling financing to green projects, technology and infrastructure that need investment.”
Researchers at BloombergNEF expect the VCC market could reach $1 trillion by 2037, while CITI Global Perspectives & Solutions are projecting $4-5 trillion of tokenized digital securities and $1 trillion of distributed ledger technology (DLT)-based trade finance volumes by 2030.
Transparency, authenticity, security
Recent headlines have provided all too vivid reminders that the business of carbon credits requires certainty that the credits one is purchasing are what they purport to be. The Tokenovate-ZERO13 partnership might not prevent all recurrences of such incidents, but it does represent another front in the effort to bring blockchain-based solutions to problems involving fraud and ‘greenwashing.’
Tokenovate’s Baker said his company believes BSV is the only blockchain with “the inherent power to fully exploit the benefits and satisfy the market’s appetite to switch over to true smart contracts.”
The BSV blockchain’s unparalleled data-handling capacity—BSV set a new global record last week with over 86 million transactions in a 24-hour period—enables it to serve as a universal source of truth. New applications are offering consumers real-world solutions to problems of transparency, authenticity and security, including heretofore unimaginable insights into traditionally opaque aspects of commerce.
Like Gate2Chain’s Trace, which allows customers to verify that the contents of their meals are indeed as advertised. As Michelin chef Ollie Dabbous observed at last week’s London Blockchain Conference (LBC) preview event, it’s one thing for a restaurant to promote its meticulous sourcing of the high-quality ingredients on its menu, but it’s “another thing doing it and also being able to prove it.”
Dabbous also referenced the win-win ripple effects of an application like Trace, noting that restaurant suppliers stand to benefit from increased consumer recognition of the goods they produce.
Trace, which was developed in collaboration with IBM, offers consumers the reassurance that items encompassing everything from food to clothing to art actually deserve their claimed pedigrees. BBC presenter and LBC Business Stage host Lucy Hedges said customers want “all the information, all the data” on the products they consume or acquire, and “the one thing that blockchain really hammers home is transparency.”
Utility or bust
BSV is also leading the way in terms of reassuring governments that blockchain-based activities can be both utility-based and legally compliant. Digital Asset Recovery, which offers the hope that users can regain control over lost or stolen assets, is theoretically possibly on all blockchains, but only BSV is actively pursuing efforts to conform to the accepted rules of property law.
BSV is also the only blockchain with the capacity to scale to accommodate the tsunami of unique internet addresses that the transition to IPv6 will bring. This flexibility is also why BSV is the only blockchain on which the user-friendly promises of Web3 can be realized. And that’s still only scratching the surface of what’s possible on BSV.
As LBC founder Calvin Ayre has repeatedly observed, blockchain adoption has been hindered by the ‘crypto casino’ token speculators and the irresponsible pump-and-dumps of predatory venture capital groups. It’s an uphill battle convincing the world of the vast utility the BSV Blockchain has to offer, but it’s an important message that events like the LBC are helping to communicate.
Tokenovate’s Baker will moderate an LBC panel on Day 1 (May 31) spotlighting BSV-based Smart Legal Contracts Built for Financial Derivative Trading. GMEX/ZERO13 CEO Hirander Misra and the ISDA’s Scott O’Malia will be on hand to discuss the new carbon credit scheme and the benefits that blockchain technology will bring to this sector.
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