Tokenovate, a financial services company providing distributed financial market infrastructure (dFMI) enabling programmatic lifecycle event management of the pre-trade to post-trade workflow for OTC and Exchange traded derivatives, and ZERO13, a GMEX Group initiative, have announced the successful execution of the world's first smart legal contract for voluntary carbon credit (VCC) derivatives trades referencing the 2022 ISDA (The International Swaps and Derivatives Association) Verified Carbon Credit Transactions Definitions.
The unique partnership approach enabled Tokenovate and ZERO13 to successfully demonstrate the creation of a BSV Blockchain based, high quality, smart legal contract[1] for waste to energy VCC trades originating from the ‘Bio-CNG Project AJS Fuels[2]’ in Savli, Gujarat, which uses biogas technology for capturing methane from animal waste for Bio-CNG bottling purposes to use in the transport sector. This was achieved by integrating the Tokenovate dFMI into the ZERO13 Hub, a distributed orchestration layer which digitally interconnects carbon participants, registries and exchanges across jurisdictions to trade, clear and settle VCC spot and derivatives contracts.
The VCC trades were conducted on the Securities, Commodities and Derivatives Exchange (SECDEX), a regulated financial market infrastructure (FMI) firm authorised and licenced by the Seychelles FSA, between Maverik Inc., a waste solution advisory firm representing the project developer selling and Tempus USA Inc. (Tempus Network), as the buyer. SECDEX was connected to the Universal Carbon Registry (UCR), where the VCCs are registered via the ZERO13 Hub.
VCCs are a crucial element in achieving global net zero and energy transition goals by 2030, with distributed ledger technology (DLT) playing an important part in facilitating that outcome, as evidenced by research reports:
• January 2023: Bloomberg NEF believes the Voluntary Carbon Credit market could reach $1 trillion by 2037.
• March 2023: Citi GPS “forecast $4 trillion to $5 trillion of tokenized digital securities and $1 trillion of distributed ledger technology (DLT)-based trade finance volumes by 2030”.
Richard Baker, Founder and CEO of Tokenovate commented: “The adoption of smart legal contracts will improve lifecycle event management and increase fidelity of derivative trading immensely. DLT will facilitate velocity at scale, while enhancing security and transparency. We believe the digitisation of financial market infrastructure will now accelerate, and it’s Tokenovate’s ambition to operate at the heart of this transformation. Today’s announcement and collaboration with ZERO13 is an important first step and significant milestone in bringing VCCs to market using BSV Blockchain-based smart legal contracts”.
Hirander Misra, CEO of GMEX Group and ZERO13 commented: “We are delighted to partner with Tokenovate to execute and settle the first ever trades using the ISDA VCC definitions on SECDEX, underpinned by BSV Blockchain smart contract capabilities.” He added, “Our unique approach uses a globally recognised 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.”
Scott O’Malia, CEO of ISDA commented: “The voluntary carbon market can play an important role in channelling financing to green projects, technology and infrastructure that need investment. We’re very pleased Tokenovate and its partner ZERO13 have used the 2022 ISDA Verified Carbon Credit Transactions Definitions and the Common Domain Model to create a smart legal contract for VCC trades. Digitisation of derivatives markets will significantly improve efficiency and set the foundations for growth at scale”.
Tokenovate and ZERO13 will continue to collaborate to facilitate VCC trades using DLT-based smart legal contracts, incorporating the 2022 ISDA Verified Carbon Credit Transactions Definitions alongside its globally adopted standards and digital tools.
[1] The Law Commission in the UK defines a smart legal contract “as a legally binding contract in which some or all of the contractual obligations are defined in and/ or performed automatically by a computer program”.
[2] UCR ID Number: 167.