BIS To Test Blockchain-based Green Bond Platform Project Genesis 2.0

The Bank for International Settlements (BIS) Innovation Hub Hong Kong Centre has announced its latest experiment, the blockchain-based green bond platform project Genesis 2.0, which aims to investigate tokenized carbon credits and Internet of Things (IoT) monitoring facilities green bond issuers’ commitment to reducing emissions.

The Hong Kong Monetary Authority, the UN Climate Change Global Innovation Hub, and numerous business organizations, including Goldman Sachs, participated in the initiative.

Tokenized greenhouse gas reduction promises were added to green bonds in Genesis 2.0. Investors get a primary bond obligation, rights to any future benefits, and a commitment of tokenized greenhouse gas emission reduction units connected to the bond, known as a Mitigation Outcome Interest (MOI) when they purchase such bonds.

The MOI must be redeemed using the token Mitigation Outcome Unit (MOU), which is a carbon credit token. Carbon credits are created by the bond issuer’s project and tracked by IoT monitoring devices. According to the analysis, IoT facilities might assist increase the transparency of carbon credit data.

BIS stated:

“Conceptually, the advantage of pledging carbon credit units as part of the green bond coupon results in bond issuers obtaining cheaper funding for green investments while reducing the risk of greenwashing.”

If the bond issuer falls behind on its carbon credit promise, it can purchase more MOUs on the market to meet its target.

According to a study provided by the Hong Kong Monetary Authority in March 2022, the total amount of green and sustainable debt issued in Hong Kong doubled from a year before to reach $56.6 billion in 2021.

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