Crypto Carbon Credit Market Maker Eyeing Bahamas, Switzerland Outposts

A newcomer exchange is joining the financial fray developing around making markets for carbon credits trading on distributed ledger technology.

The startup, Capturiant, has been given the initial regulatory nod to set up shop in the Bahamas, according to a source familiar with the matter and marketing materials shipped to potential backers, clients and counterparties obtained by Blockworks.

It’s a conditional approval, a prerequisite of obtaining full regulatory clearance, which is expected this spring.

The startup, the source said, is meanwhile trying to establish a foothold in Switzerland and one other jurisdiction — measures likewise contingent on local regulators.

Capturiant’s team built out the operation’s trading infrastructure throughout 2022 and fine-tuned the firm’s underlying trading tech toward year end in preparation for onboarding external clients.

Its trades will all be facilitated on-chain on the Hedera protocol, a distributed ledger technology (DLT) platform, which Capturiant has partnered with. There’s also a board of advisers in place that includes a former top BlackRock sustainability executive.

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The exchange has billed itself a “global integrated environmental asset validator” and “registry.”

It’s run by CEO James Row, who holds the title of managing partner at Entoro Capital of Houston, which has its own crypto dealings. Capturiant has been incubated with proprietary Entoro funds and is likewise headquartered in Houston. The plan is to set up additional offices, including in Nassau.

Row confirmed Capturiant’s Bahamas registration, adding that he’s expecting final approval later this year. Row declined to comment on his firm’s marketing materials, as well as counterparty communications, citing regulatory restrictions including private placement rules.

Row has a commodities trading background that includes Enron, the energy investment titan that imploded.

Capturiant is looking to differentiate from what has become quite the crowded field: Attempts to capitalize on institutional appetite for investments that are, at least purportedly, designed to dish out dollars and benefit the environment at the same time.

Not just carbon credits

That interest extends to tokenized versions of carbon offsets, which aren’t necessarily reliant on DLT to function.

In addition to carbon credits, the firm is looking to exchange “other nature-based validator activities,” according to its materials, including reforestation efforts.

There are, however, also plays in sectors that have done great environmental damage, including oil and gas, as well as real-world (not crypto) miners. The thinking is that those historic polluters still maintain market share dominance over energy.

And have their own environmental initiatives in the works, however self-serving they may be.

Capturiant is also hawking what are essentially futures on private green startups. Futures, a derivatives subset, are typically based on assets like stocks and commodities that turn over frequently.

The exchange’s product is designed to apply that same structure to private initiatives based on a “preliminary analysis of the environmental and sustainable development benefits to be generated from a project,” the marketing materials say.

Wall Street has dabbled in carbon credits for years. When they first hit the market, the financial instruments were met with skepticism. They were illiquid; they failed to reach critical mass.

Carbon credits, as well as related assets branded as friendly to environmental, social and governance (ESG) initiatives, are generally designed to provide a mechanism for big businesses to “offset” their massive carbon footprints that contribute in no small way to global warming.

The esoteric asset class has since carved out a niche, though interest has waxed and waned as macro conditions have shifted.

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