Nasdaq has recently introduced a groundbreaking new technology designed to revolutionise the voluntary carbon market. The new system aims to streamline the entire process of issuing, settling, and holding carbon credits, which is expected to play a key role in the market’s continued growth over the coming years.
According to Gerard Smith, Vice President of Business Development for Nasdaq’s Marketplace Technology business, many current carbon market registries rely on outdated technology, making it difficult for users to navigate. Nasdaq’s solution, however, represents a significant step forward, digitising assets and offering a comprehensive set of APIs that are essential for connecting with registry platforms in a similar way to traditional financial markets. This development comes after 18 months of dedicated work on the technology, which commenced around a year ago.
The new platform is built on a foundation of smart contracts, utilising the DAML smart contract language developed by Digital Asset. This platform promises to offer customers a greater level of flexibility, allowing them to choose between different database or enterprise blockchain options based on their individual needs and cost considerations.
Smith emphasised that the growing carbon market will benefit greatly from Nasdaq’s new technology, which addresses various obstacles currently limiting the market’s potential for expansion. The platform’s use of APIs will enable registries to aggregate their data and provide seamless settlement instructions, effectively paving the way for future growth.
In addition to this new development, Nasdaq has been actively involved in the carbon space for some time, as well as in broader ESG (Environmental, Social, and Corporate Governance) solutions. The 2021 acquisition of Puro.earth, the world’s leading platform for engineered carbon removal, and partnership with the Global Blockchain Business Council on the carbon taxonomy framework, underscore Nasdaq’s commitment to advancing sustainable and responsible business practices.
Furthermore, Nasdaq’s new technology is not limited to carbon credit markets alone; it holds potential for application in other asset classes. By digitising the issuance process into tokens, this platform provides a strong foundation for financial services providers to explore additional opportunities in the market.
Smith highlighted the efficacy of technology in addressing the integrity issues present within voluntary carbon markets, particularly regarding the transparency of smart contracts. Looking ahead, Nasdaq will continue to enhance and expand the functionality of its platform, catering to different asset classes and reinforcing its role as a leader in sustainable finance.
Recent developments in the carbon market have attracted considerable attention from global regulators and market participants. The World Bank’s plans for maintaining high-integrity global carbon markets and the Commodity Futures Trading Commission’s proposed guidance for voluntary carbon credit derivative contracts, demonstrate the increasing importance of standardisation and regulatory oversight within the market.
As the demand for international carbon credits continues to rise, Nasdaq’s innovative technology is stepping up to meet the challenge, facilitating fair, efficient, and transparent trading in the market. With carbon credits projected to exceed $50 billion in value by 2030, Nasdaq’s efforts are poised to make a significant impact, driving positive change towards sustainability and green finance.
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