Project Genesis: BIS to explore investing in green bonds

The project will use the tokenisation of green bonds to “enable investment in small denominations"

Bank for International Settlements’ head office in Switzerland                                 
The head office of the Bank for International Settlements in Switzerland – Photo: Shutterstock
                                

The Bank for International Settlement (BIS) Innovation Hub Hong Kong Centre has announced a collaboration with the Hong Kong Monetary Authority (HKMA) and six technology companies to explore the tokenisation of green bonds . The partnership aims to “enable the investment in small denominations, combined with real-time tracking of environmental outputs”.

The venture has been dubbed Project Genesis. The BIS Innovation Hub in Hong Kong has launched the scheme as it believes “issuing and investing in bonds can be cumbersome and complex, involving many steps and parties, and typically requiring a considerable financial commitment from the investor”.

Additionally, the BIS Innovation Hub stated that those who invest in environmentally friendly projects are often left uncertain “about whether the bond issuer is delivering the positive green impact it committed to at issuance”.   

Plan to improve transparency

The BIS Innovation Hub and HKMA plan to build a prototype digital infrastructure to improve the transparency on the use of proceeds, and “thereby help meet regional and global environmental and sustainability goals”.

Benoît Cœuré, head of the BIS Innovation Hub, said: “Green and digital are not only interconnected but interdependent – the fate of one depends on the other. Green finance, accordingly, is a key priority of the BIS Innovation Hub and Genesis is an integral part of that.”

HKMA deputy chief executive Edmond Lau said: “The HKMA welcomes the collaboration with BIS Innovation Hub on this novel experimentation on the symbiosis of sustainability and tech.

“Technologies such as blockchain and smart contracts, combined with the internet-of-things (IoT), could streamline the bond issuance process, improve efficiency in distribution and facilitate reporting on the use and environmental impact of green bonds proceeds, thus enhancing transparency to green bond investors.”

Six tech firms join as partners

Project Genesis will be developed with six partner companies that will design the digital infrastructure. Switzerland-based Digital Assets AG, which helps clients to tokenise and trade various financial products and instruments, and its partner GFT Technologies Hong Kong will deploy multiple permissioned blockchains.

The Liberty Consortium, which is part of Project Genesis and consists of SC Ventures, Standard Chartered Bank and Shareable Asset, will be leveraging a public permissionless blockchain infrastructure.

Allinfra, which gives clients access, choice and liquidity to global infrastructure and environmental assets, will provide technology verified data that can track in real-time the positive environmental impact of projects.

Bénédicte Nolens, head of the BIS Innovation Hub Hong Kong Centre, said: “Our vision is that you can download an app to your phone and invest any amount into safe government bonds, which will develop a green project – let’s say a solar or wind farm.

“Over the bond’s lifetime, you would be able to not just see accrued interest, but also track in real time how much clean energy is being generated and the consequent reduction in CO2 emissions linked to your individual investment. Further, you could sell the bonds in a transparent market.”

Project Genesis aims to show the “the green art of the possible” through the combination of blockchain, smart contracts, IoT and digital assets. The development teams are working to build the prototypes and “collaborating with key stakeholders in the Hong Kong financial ecosystem”.

Further reading: New innovation hub will explore central bank digital currencies

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