Genesis 2.0: smart contract-based carbon credits attached to green bonds

Project Genesis 2.0 is a collaboration between the BIS Innovation Hub's Hong Kong Centre, the Hong Kong Monetary Authority and the UN Climate Change Global Innovation Hub, with two consortia.

Through the use of blockchain, smart contracts and the internet of things (IoT), Genesis 2.0 delivered two prototypes that demonstrate the technical feasibility of tokenised green bonds with mitigation outcome interests (MOIs) attached. These are de facto verified carbon credits recognised by either international, national or other verification mechanisms in line with the Paris Agreement. The MOIs are digitally tracked and automatically delivered to investors, through the use of distributed ledger technology and smart contracts, combined with IoT devices tracking the carbon credits at source. A legal term sheet for the bonds was contributed by King & Wood Mallesons.

The first prototype, developed by Goldman Sachs, Allinfra and Digital Asset, showcased a simulated solution for an end-to-end digital flow for institutional green finance. The straight through process via a distributed ledger technology platform was able to digitally track, deliver and transfer MOIs, in addition to tokenising the issuance of the green bond itself. It was able to achieve smart contract-based delivery of bonds and MOIs, and provided source data transparency enabled by IoT technology.

The second prototype, developed by InterOpera in collaboration with Krungthai Bank, Samwoo and Sungshin Cement, was built on an interoperable host chain designed as part of a wider ecosystem. With a combination of blockchain, smart contract and application programming interface (API) technologies, it also digitally tracked, delivered and transferred MOIs throughout the full green bond life cycle.