Neutral, a German brokerage firm, has partnered with DLT Finance to launch a new way to trade carbon credits using blockchain technology. These money tools can be used to support forests and green energy products, helping businesses reduce their impact on the environment.
Other projects have tried to use blockchain for the carbon credit market, but Neutral and DLT Finance are the first ones to get approval from Germany’s financial regulator, BaFin, to run the exchange.
Neutral and DLT Finance work together to make it easier to trade carbon credits
Carbon credits, also known as carbon offsets, are projects that help reduce pollution in the air. These projects can include things like protecting forests, building wind and solar energy farms, or capturing methane gas.
In simple terms, one carbon credit equals saving one metric ton of carbon dioxide from the air. To a buyer, it means they can release the same amount of carbon without feeling guilty (and sometimes without paying taxes).
Neutral CEO Farouq Ghandour stressed how important it is to make it easier for regular traders to use these assets by improving the market infrastructure. Ghandour praised Neutral for their technology and gave credit to DLT Finance for handling the regulations.
This product is different because it is easy for users to use, and it hides the complicated parts of blockchain technology. The exchange is for trading things like oil, gold, and coffee. It makes trading easier and doesn’t need new technology like tokenization or decentralization. You don’t need MetaMask wallets if you don’t want to use them.
In Germany and some other parts of Europe, the cryptocurrency and blockchain industry has become a top choice for investments in financial technology companies in the first half of 2023.
Ghandour said the exchange wants to work like regular commodities platforms and have better trading for big trades compared to decentralized exchanges. He said that banks and other financial companies are not willing to work with DEXs, which is stopping the use of blockchain-based carbon markets from spreading.
The key to making this initiative successful is to have a trusted partner who follows rules and takes care of the concerns of banks about following the rules and managing risks.
A recent survey of climate experts found that in order to meet the Paris Agreement’s goal of having no greenhouse gas emissions by 2050, we need to set a price of at least $100 for each metric ton of carbon dioxide.
The International Monetary Fund (IMF) says the average global carbon price is only $3. Neutral and DLT Finance want to make it easier for companies to use blockchain technology in the carbon credit market. They aim to create a simple and easy-to-use platform that follows the rules, so businesses can offset their carbon emissions more efficiently.
A top BaFin official wants worldwide rules for cryptocurrencies, even though the EU is making progress with its own regulations.
The European Union has made rules for cryptocurrencies with the MiCA framework, but a leader from the BaFin in Germany thinks there should be worldwide rules for the crypto industry.
In a blog post on September 18, Rupert Schaefer, who works for BaFin, talked about how important it is to have the same rules for cryptocurrencies all over the world. Schaefer compared regulators to air traffic controllers and called some crypto assets and decentralized finance projects “unidentifiable flying objects,” which shows the difficulty for regulators to monitor the crypto space.
Schaefer praised the progress of MiCA adoption in the EU and international regulatory recommendations from organizations like the Financial Stability Board and the International Association of Securities Commissions, but also pointed out that there are still inconsistencies worldwide. He said it’s important for everyone to follow the same rules around the world. He also said that all financial centers should have rules that they have to follow.
This means that people all around the world need to work together to make rules for cryptocurrency. Indian Prime Minister Narendra Modi also said that G20 countries should cooperate to make these rules.