Nasdaq launches carbon credit digitisation service
29 November 2023 US
Image: Antony Weerut/stock.adobe.com
Nasdaq has launched a service digitising the issuance, settlement and custody of carbon credits.
Designed for market infrastructures, registry platforms and other service providers globally, the service aims to support the development and institutionalisation of global carbon markets.
Market operators and registries will be able to create standardised digital credits through the service, and distribute these with full auditability through the transaction lifecycle.
The service’s issuance, settlement and custody capabilities can be integrated with existing technology architectures, and connect to existing payment networks and bilateral settlement options.
As such, infrastructure providers will be able to continue providing services to traditional markets while benefitting from carbon markets’ growth opportunities, without entirely changing their programmes.
Using smart contract technologies, clients can create and process rights, obligations and other underlying asset-related information in a secure manner.
Automating asset servicing and settlement procedures in this space will improve efficiency and transparency in the trade lifecycle, Nasdaq explains, creating a complete audit trail of credit ownership and retirement.
Nasdaq has also developed a carbon taxonomy framework, which new types of credit can be added to as the market evolves.
Along with a new set of APIs, enabling interaction between participants across the market, this will help to improve trust in the ecosystem and attract “high-quality liquidity” from investors.
Significant capital flows, and scalability, are currently prevented in the market due to a lack of standardisation, Nasdaq says. This is in part due to global carbon markets’ strong reliance on manual processes.
Roland Chai, executive vice president and head of marketplace technology at Nasdaq, says: “Fragmented technology choices in the trading and settlement of carbon credits has prevented the carbon industry from growing and maturing as an asset class. A lack of system flexibility, standardisation, and connectivity has made it challenging for critical infrastructure providers and institutional investors to access the market in a meaningful way.
“Bringing institutional grade technology to underpin the market will drive ever-greater liquidity across carbon marketplaces and open the possibility of greater interoperability between registries in the future.”
Designed for market infrastructures, registry platforms and other service providers globally, the service aims to support the development and institutionalisation of global carbon markets.
Market operators and registries will be able to create standardised digital credits through the service, and distribute these with full auditability through the transaction lifecycle.
The service’s issuance, settlement and custody capabilities can be integrated with existing technology architectures, and connect to existing payment networks and bilateral settlement options.
As such, infrastructure providers will be able to continue providing services to traditional markets while benefitting from carbon markets’ growth opportunities, without entirely changing their programmes.
Using smart contract technologies, clients can create and process rights, obligations and other underlying asset-related information in a secure manner.
Automating asset servicing and settlement procedures in this space will improve efficiency and transparency in the trade lifecycle, Nasdaq explains, creating a complete audit trail of credit ownership and retirement.
Nasdaq has also developed a carbon taxonomy framework, which new types of credit can be added to as the market evolves.
Along with a new set of APIs, enabling interaction between participants across the market, this will help to improve trust in the ecosystem and attract “high-quality liquidity” from investors.
Significant capital flows, and scalability, are currently prevented in the market due to a lack of standardisation, Nasdaq says. This is in part due to global carbon markets’ strong reliance on manual processes.
Roland Chai, executive vice president and head of marketplace technology at Nasdaq, says: “Fragmented technology choices in the trading and settlement of carbon credits has prevented the carbon industry from growing and maturing as an asset class. A lack of system flexibility, standardisation, and connectivity has made it challenging for critical infrastructure providers and institutional investors to access the market in a meaningful way.
“Bringing institutional grade technology to underpin the market will drive ever-greater liquidity across carbon marketplaces and open the possibility of greater interoperability between registries in the future.”
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