Nasdaq has launched a new technology designed to digitise the issuance, settlement and custody of carbon credits aimed at enhancing the global carbon markets.
The technology addresses challenges in the market, characterised by bilateral trading and manual processes and a heavy reliance on manual interaction.
This inflexibility has also led to an absence of standardisation – where credit data can be categorised and integrated into existing systems. This has created a major barrier to attracting significant capital flows.
The new techology will enable market operators and registries to create and distribute standardised digital credits with complete auditability throughout the transaction lifecycle.
Nasdaq has also developed a carbon taxonomy framework that can incoproate new types of credit as the market evolves, along with a comprehensive set of APIs that will allow participants to interact across the market.
Roland Chai, executive vice president and head of marketplace technology at Nasdaq, said: “Fragmented technology choices in the trading and settlement of carbon credits has prevented the carbon industry from growing and maturing as an asset class.”
He added, “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.”
The firm said the technology uses smart contracts which enables secure creation, processing, and management of rights linked to the underlying asset. It will also automate asset servicing and settlement procedures.
The technology can be integrated with existing systems or be deployed as a standalone platform. It can also be placed on a centralised database or use private blockchain technology.
Alongside the launch of the service, Nasdaq has partnered with Puro.earth, a registry platform for engineered carbon removal, to register CO2 removal certificates. It tracks the issuance, retirement, and the transfer of the assets.
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