Shalini Nagarajan

The fintech arm of major Chinese real estate developer Greenland is reportedly vying for a Hong Kong virtual asset trading license, after the city-state recently introduced a new licensing framework tailored for crypto. 



Greenland Financial Technology Group, whose parent company is 46.4% owned by the Shanghai municipal government, is poised to make its second foray into digital banking, per South China Morning Post.



The firm is said to be the first state-owned entity to show interest in capitalizing on Hong Kong’s crypto push. Geng Jing, the firm’s CEO, <a href="https://www.scmp.com/business/article/3220802/unit-chinese-state-owned-developer-greenland-apply-hong-kong-virtual-asset-trading-licence-ceo-says?module=live&amp;pgtype=homepage" target="_blank" rel="noreferrer noopener">reportedly</a> said the firm hopes to delve into crypto trade, NFTs and carbon credits.



Jing reportedly highlighted the strategic significance of obtaining a Hong Kong virtual asset operator’s license. He noted the move would broaden the company’s business portfolio and enhance its global presence. Blockworks has reached out to the subsidiary for comment.



Greenland’s interest in setting up shop in Hong Kong is particularly noteworthy due to mainland China’s harsh stance on digital asset trading, which has included <a href="https://blockworks.co/news/cryptos-decline-as-china-doubles-down-on-regulations-markets-wrap" target="_blank" rel="noreferrer noopener">restrictions on such activities</a>. 



In 2018, Greenland Holdings was one of 29 applications vying for virtual bank licenses issued by Hong Kong. But its hopes were dashed when it wasn’t among the chosen eight. Now, it&#8217;s reportedly trying again with a crypto twist.



Earlier this year, Hong Kong’s Securities and Futures Commission (SFC) <a href="https://blockworks.co/news/hong-kong-crypto-moves" target="_blank" rel="noreferrer noopener">proposed new regulations</a> for the crypto industry, including a fresh licensing scheme.



The SFC emphasized that all existing and prospective crypto trading platforms must initiate a thorough review of their systems and controls in preparation for the forthcoming regulatory framework.



The framework’s consultation process generated an overwhelming response, with over <a href="https://www.bloomberg.com/news/articles/2023-04-27/hong-kong-sfc-to-issue-crypto-exchange-license-guidelines-in-may" target="_blank" rel="noreferrer noopener">150 submissions</a> received.



In any case, Hong Kong’s efforts to <a href="https://blockworks.co/news/hong-kong-crypto-testing-ground" target="_blank" rel="noreferrer noopener">attract players</a> in the crypto space appear to be working. Regional crypto exchanges Huobi Global and OKX were the first prominent firms to <a href="https://www.scmp.com/tech/tech-trends/article/3210963/crypto-exchanges-huobi-okx-eye-hong-kong-licences-regulators-ready-new-virtual-asset-rules" target="_blank" rel="noreferrer noopener">announce their intent</a> to apply for the same license.



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State-backed Chinese Developer Unit Wants Hong Kong Crypto License: Report

Ben Strack

Natural gas producer PureWest is minting tokenized emissions credits in an effort to reduce the footprint of a methanol producer and other customers.



The Denver-based company’s certified environmental tokens (CETs) reflect aggregated data collected and verified by data company Project Canary.&nbsp;



PureWest is now transacting the tokenized credits with Switzerland-based Proman, the world&#8217;s second largest methanol producer, the energy firm announced this week.&nbsp;PureWest itself is the most prolific natural gas producer in Wyoming, per its website.



The CETs are each matched to one million British thermal units (MMBtu) of gas produced and are sold on an MMBtu basis, Kelly Bott, PureWest’s senior vice president of ESG, land and regulatory told Blockworks.&nbsp;



Using blockchain eliminates concerns about double selling and proves that each MMBtu of gas was produced with the Project Canary-verified attributes. PureWest <a href="https://purewest.com/news/purewest-energy-and-proman-sign-agreement-to-reduce-scope-3-methanol-footprint-through-digital-tokens/" target="_blank" rel="noreferrer noopener">describes</a> CETs as &#8220;purchasable credits stored on the blockchain for third-party users to achieve their emission reduction goals.&#8221;



“With the purchase of these tokens, Proman can now purchase gas from anywhere while taking credit for our low-methane, freshwater friendly, safely and responsibly produced/certified gas when calculating their own environmental footprint,” Bott said.&nbsp;&nbsp;&nbsp;



“These types of transactions serve to incentivize other producers to reduce their own environmental footprint and jump into this rapidly developing market.”



The tokens are transacted and stored on EarnDLT’s private blockchain, which was built using enterprise blockchain platform Quorum.&nbsp;



JPMorgan forked Ethereum to create Quorum in 2016 before selling it to blockchain software firm ConsenSys four years later.



<h2 class="wp-block-heading">Tokenization is becoming en vogue</h2>



The PureWest-Proman linkup comes after Gold Standard chose climate tech company Flowcarbon to help it finalize guidelines around tokenizing voluntary emission reduction (VER) credits.&nbsp;



Gold Standard CEO Margaret Kim said in a statement last September — when the company began <a href="https://www.goldstandard.org/blog-item/gold-standard-announces-proposals-allow-creation-digital-tokens-carbon-credits" target="_blank" rel="noreferrer noopener">exploring</a> how it should go about creating digital tokens — that “blockchain could bring innovation, transparency and greater finance to the carbon market.”&nbsp;&nbsp;



<a href="https://blockworks.co/news/2023-year-of-asset-tokenization" target="_blank" rel="noreferrer noopener">Tokenization has picked up steam</a> in recent months, with Goldman Sachs, investment firm <a href="https://blockworks.co/news/private-markets-investment-firm-hamilton-lane-to-tokenize-3-funds" target="_blank" rel="noreferrer noopener">Hamilton Lane</a> and Hong Kong’s government among those who have revealed such initiatives.&nbsp;&nbsp;



BlackRock’s Larry Fink, CEO of the world’s largest asset managers, said in a letter earlier this month that the tokenization of assets is <a href="https://blockworks.co/news/blackrock-ceo-us-lagging-innovation-tokenization" target="_blank" rel="noreferrer noopener">an attractive use case</a> for his company. He had previously called the tokenization of securities <a href="https://blockworks.co/news/blackrock-ceo-still-in-crypto-for-the-tech-despite-ftx-scandal" target="_blank" rel="noreferrer noopener">“the next generation for markets.”</a>



Most recently, <a href="https://blockworks.co/news/tokenized-home-nets-thousands" target="_blank" rel="noreferrer noopener">Roofstock sold a Georgia home to ReaIT</a>, a provider of fractional real estate investment in tokenized assets, in a transaction facilitated by an Ethereum-based NFT.



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Major Energy Companies Are Trading Tokenized Emissions Credits

Michael Bodley

<div id="highlights-block_6334582d3129b" class="highlights">
 <ul>
 <li>No partnership has raised even close to $2 billion for a series of market-making products that feature both asset classes</li>
 <li>Tokenized carbon credits feature aspects of structured products, commodities and related derivatives</li>
 </ul>
 
</div>



Carbon offset credits, meet crypto.



Digital assets-focused exchange and carbon credit liquidity provider 1GCX and T3 Trading, a proprietary trading firm that invests in the space, have struck a deal, raising a whopping $2 billion and setting up a $100 million liquidity pool to ease carbon credit transactions.



The move, made possible by the unprecedented fundraise for tokenized carbon credits, has been propelled by the <a href="https://cms.blockworks.co/mymetaverse-launches-carbon-sink-nfts-to-further-web3-sustainability/" target="_blank" rel="noreferrer noopener">growing interest</a> of institutional investors in the securities, executives from the firms exclusively told Blockworks. Such securities — proponents say — ease the ability of institutional investors, including pension plans and endowments, to put their money where their mouth is in terms of deriving measurable alpha from ESG investment products.&nbsp;



As an asset class, however, fractionalized carbon credits carry plenty of risk: The financial instruments are quite volatile, and the verdict is still out, according to detractors, on how much good they do in terms of stopping the rampant spread of <a href="https://cms.blockworks.co/blockchain-tech-is-key-to-combating-climate-change-report-says/" target="_blank" rel="noreferrer noopener">global warming</a>. And that’s not to mention a glaring absence of liquidity, considering the offsets trade more like illiquid structured products than anything else in digital assets, despite coming with far steeper ups and downs in terms of price.&nbsp;



Enter 1GCX, which is providing the infrastructure for the ambitious new trading platform.



T3 moves millions of dollars of capital around between a number of major crypto exchanges and also puts money to work in commodities markets. Both firms additionally specialize in equity derivatives and have rolled out a number of related synthetic trading pairs coupling commodities with cryptocurrencies. The exact terms of the deal were not disclosed.&nbsp;



The idea is to set up a series of liquidity pools and associated over-the-counter (OTC) market-making activities that reduce the spreads of such transactions in a bid to attract institutions into the markets, including entities from traditional finance accustomed to carbon assets but still learning when it comes to digital assets.&nbsp;


<div class="wp-block-image">
<figure class="alignright size-thumbnail"><img decoding="async" loading="lazy" width="150" height="150" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png" alt="" class="wp-image-32708" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/09/1GCX-1-150x150.png?w=400 400w" sizes="(max-width: 150px) 100vw, 150px" /><figcaption>RA Wilson, 1GCX’s chief technology officer</figcaption></figure></div>


RA Wilson, 1GCX’s chief technology officer, told Blockworks the company has been doing due diligence on the feasibility — and the cost of quantitative-driven execution — on the initiative for several years. It was especially driven after finding there were virtually no other market makers that catered to retail and accredited investors alike in terms of pairing digital assets with real-world commodities, plus derivatives.



Even now, according to Wilson, liquidity is mostly made up of bulge-bracket banks snapping up large quantities of the carbon securities at discounted prices, then acting as an unofficial marker maker for counterparty trading firms. The banks likely capture a handsome spread for doing so, considering such trades are essentially de facto OTC in nature. 



<h3 class="wp-block-heading">The case for tokenization</h3>



Wilson, who has personally invested in crypto since 2011, said he noticed about five years ago that, while carbon credits — promoted by governments, including the US, and featuring tax incentives, in select cases — were gaining momentum, companies see the products as more of a do-good effort, not the “currency” the instruments were designed to become.&nbsp;



“Business development starts with building the right marketplace, making sure there’s liquidity, of higher-quality offsets and nature-based solutions,” Wilson said. “Diverting financial assets from land-based projects can actually benefit us globally.”



1GCX is also in the relatively early stages of developing its own blockchain, featuring a token that draws a parallel between “proof-of-authority” and algorithmic “computational proof-of-authority.”



Proof-of-authority is a method of signing off on transactions that features elements of proof-of-stake consensus mechanisms but relies on validators <a href="https://medium.com/poa-network/proof-of-authority-consensus-model-with-identity-at-stake-d5bd15463256" target="_blank" rel="noreferrer noopener">staking their identity or reputation</a>. It typically features in private, centralized blockchains, rather than public permissionless systems.



The end goal: building a digital assets-based market driven by the burgeoning “green web mixed with the internet of energy.”



The first-of-its-kind setup would, ideally, increase the transparency of price discovery and real-world utility — in terms of combating climate change — two common thorns of institutional investors that until now have had to rely on Wall Street and the commodities hub of Chicago to transact in illiquid carbon credits denominated via the murky pricing of market makers.



Traders using 1GCX already have access to a range of digital assets, such as bitcoin, ether, AVAX and SOL. 



There’s already a “huge demand” from institutions hungry for carbon offset credits, one that’s growing every year, according to Wilson. The launch of the trading platform ought to boost liquidity, transparency and fair pricing — while clamping down on fraud — by adding crypto to the mix, he said.



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Upstart Crypto Carbon Credits Platform Raises $2B to Tap ‘Internet of Energy’

<div id="highlights-block_625efbaff8465" class="highlights">
 <ul>
 <li>By storing carbon credits as digital tokens, they can be more easily tracked and traded</li>
 <li>Companies using blockchains and smart contracts to advance climate change initiatives to become “industry norm,” according to Chainlink Labs</li>
 </ul>
 
</div>



Blockchain technology will play a key role in combating climate change by managing clean energy solutions and enabling enhanced automation, a report by Chainlink Labs and Tecnalia says.



<a href="https://chainlinklabs.com/" target="_blank" rel="noreferrer noopener">Chainlink Labs</a>, which offers open-source blockchain interoperability solutions, and European research institute <a href="https://www.tecnalia.com/en/" target="_blank" rel="noreferrer noopener">Tecnalia</a> posited in a <a href="https://chain.link/resources/managing-climate-change-energy-industry" target="_blank" rel="noreferrer noopener">report</a> Tuesday that the energy industry can make clean energy investments more efficient by leveraging blockchain technologies.  



By tapping blockchains, the power business can better digitize and value clean energy investments, according to the report. That would likely lead to additional capital deployed to green investment opportunities, more transparency and stronger accountability when it comes to meeting climate-friendly commitments, the two companies found.&nbsp;



The report labels “hybrid smart contracts” as the new backend framework necessary for building clean energy solutions. The framework uses blockchains to track and settle multi-party processes and smart contracts to define the rules for involved parties.



It also uses oracles — or interoperability solutions for blockchains built on smart contracts — to integrate data and non-blockchain infrastructure into the contracts.



More than 140 research projects and startups had begun studying, testing and deploying blockchain-based solutions as of 2019 to improve energy industry processes, the report says.



“As more and more companies recognize how blockchains, smart contracts and oracles can advance climate change initiatives, we’ll begin to see a trend that will only grow with time until it becomes an industry norm,” a Chainlink Labs spokesperson told Blockworks.&nbsp;



Among the use cases outlined in the report are tokenized carbon credits, which companies buy to offset emissions. By storing carbon credits as digital tokens, the thinking goes, the tokens can be more easily tracked and traded, and oracles can then issue and audit them.



Oracles can use satellite and remote sensing data to measure the carbon sequestration in a certain region to verify a project’s stated carbon offset before issuing a credit.



Hybrid smart contract system Hyphen, for example, uses Chainlink oracles to bring verified greenhouse gas data on-chain and prove stated corporate climate commitments.



“We can now supply validated real-world measurements to dynamic carbon assets,” Hyphen CEO Miles Austin said in a statement. “This gives confidence to investors, capital markets, banks [and] regulators.”



Like the tokenization of carbon credits, climate bonds and green bonds — fixed income instruments that raise money for environmental projects — can also be tokenized on blockchains.



Ethereum-based climate risk solutions platform <a href="https://c212.net/c/link/?t=0&amp;l=en&amp;o=3508495-1&amp;h=1682524004&amp;u=https%3A%2F%2Fwww.arbolmarket.com%2Fenergy&amp;a=Arbol" target="_blank" rel="noreferrer noopener">Arbol</a> uses smart contracts to help energy businesses hedge power demand and revenue fluctuations around changing temperatures.



Individuals could also be incentivized to reduce emissions through rewards programs, according to the report. Consumers could be compensated with crypto or NFTs in exchange for meeting the requirements of a smart contract designed to minimize their carbon footprint.



Going forward, clean energy industry leaders must assign researchers to focus on the benefits of blockchain technology and how they can leverage smart contract and oracle technologies before competitors, the Chainlink Labs representative said.



“What they discover will motivate them to act,” the spokesperson added. “And that momentum on an industry-wide level will help facilitate the inflection point we need to realize a more sustainable future.”



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