The CFTC and voluntary carbon markets

June 29, 2023

Tokenovate comments on the CFTC’s second voluntary carbon markets convening.

The Commodity Futures Trading Commission (CFTC) recently announced that the second voluntary carbon markets convening will be held on July 19. The first convening took place a year ago, in June 2022. 

The purpose of the meeting is to discuss different initiatives related to high quality carbon credits, current trends and developments in the cash and derivatives markets for carbon credits, both from a public and private perspective, as well as how the CFTC can promote the integrity of the market.  

CFTC chairman Rostin Behnam said: “The voluntary carbon markets are at a critical point in their development and growth, and the CFTC has an important policy responsibility to promote product innovation, price discovery, and liquidity for high-quality carbon credits that are the underlying commodity for derivatives products listed on CFTC-registered exchanges.”

Tokenovate welcomes the development of robust international standards for VCC definitions. A solid and universally adopted foundation will attract much-needed trade finance to fund global carbon projects, which in turn will help accelerate the removal of CO2 – a key goal of the United Nation’s Net-Zero coalition

At the end of 2022, the International Swaps and Derivatives Association (ISDA) published comprehensive VCC Definitions for derivative trading. Tokenovate’s smart legal contract system has already adopted these definitions (and we announced our first trades here). As we move forward towards deeper standardisation, digitising and eventually automating the derivative trading lifecycle, it’s imperative that trust and credibility is at the core of any solution. It is possible, and in our view desirable, that VCCs can become a digital-first asset class, so that double-spend of credits is eradicated, liquidity is enhanced and the lifecycle management becomes frictionless. 

Shortly, we will dig deeper into how tokenisation of physical assets and projects can be brought into digital custody and be executed OTC or via an Exchange. 


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