(Kitco News) - The Bank for International Settlements (BIS) has released the results of its Genesis 2.0 initiative, a project designed to explore the use of blockchain, smart contracts and the Internet of Things (IoT) to help make the green finance market more efficient and effective.
Genesis 2.0 was conducted in conjunction with the Hong Kong Monetary Authority and the United Nations Climate Change Global Innovation Hub. Two private consortia also participated in the project. Goldman Sachs, Allinfra, and Digital Asset comprised one group, while the other included InterOpera, Krungthai Bank, Samwoo and Sungshin Cement.
To help achieve its goal of directing the world of finance towards effective climate solutions, the project combined the green bond market and the carbon market into a new green bond structure that includes mitigation outcome interests (MOIs) – which are future contracts with a commitment to deliver, at maturity, verified carbon credits compliant with the Paris Agreement.
Essentially, MOIs allow issuers to borrow against the delivery of the carbon credits upfront as a way to fund their green economy projects in advance.
The collaboration resulted in the creation of two tokenized green bond prototypes that utilize blockchain, smart contracts, and internet-of-things (IoT) to digitally track, deliver and transfer MOIs appended to the green bond.
Each prototype has demonstrated the ability to “allow investors real-time transparency on the environmental impact of the use of proceeds from the green bond, efficient trading and settlement of MOIs, as well as potential solutions to concerns of double counting in carbon credits,” the report said.
The prototype developed in conjunction with the Goldman Sachs, Allinfra and Digital Asset consortium is able to digitally track, deliver and transfer MOIs, as well as tokenize the issuance of the green bond itself. “It is able to achieve smart contract-based delivery of bonds and MOIs, and provides source data transparency enabled by IoT technology.”
The prototype developed in conjunction with the InterOpera, Krungthai Bank, Samwoo and Sungshin Cement consortium was built on an interoperable host chain designed as part of a wider ecosystem. It can digitally track, deliver and transfer MOIs throughout the full green bond lifecycle, according to the BIS.
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Project Genesis 2.0 was set in motion following the conclusion of Project Genesis 1.0, which was conducted by the BIS and Hong Kong Monetary Authority in 2021. While version 1.0 explored the possibility of tokenizing retail green bonds using both a public blockchain and a permissioned blockchain, version 2.0 sought to address the issue of greenwashing in the green bond market and demonstrate the benefits of integrating the green bond and carbon markets.
The BIS is one of the most active entities in exploring the various use cases of blockchain technology for a variety of applications, especially as it pertains to the creation and distribution of central bank digital currencies (CBDCs).
