Crypto carbon credits exchange 1GCX partnered with T3 Trading, raising $2 billion in assets under management (AUM) and setting up a $100 million liquidity pool to ease carbon credit transactions.
1GCX is a digital asset exchange offering cryptocurrency, commodity, and carbon offset trading.
T3 Trading is a proprietary trading firm that invests in cryptocurrency and carbon offsets.
With their partnership, carbon credits or carbon offsets meet crypto. It will marry digital assets and carbon credits to capitalize on the growing interest of investors in both sectors.
Promoting Liquidity on Carbon Credit Exchanges
With ~$2 billion in AUM and $100 million in liquidity dedicated to carbon credits, the T3 fund seeks to improve liquidity on the 1GCX carbon credits exchange.
The funding will help pump revenue for the growing carbon credits market. It will also ramp up 1GCX aim to establish a standard for buying and selling carbon credits.
As for the exchange’s President and COO, Michael Wilson, he stated that:
“Carbon credits have the potential to scale to a multi-trillion dollar market over the next several years, but the market opportunity is still relatively untapped as the sector continues to mature…”
He further said that with T3 Research as its third-party liquidity provider, 1GCX will drive price discovery and trade volume in the voluntary carbon market.
More importantly, the platform will help normalize the supply and demand for carbon credits on chain.
The raised fund for tokenized carbon credits made the deal possible. It’s also driven by the rising interest of institutional investors such as pension plans in the securities.
But there are a couple of risks associated with carbon credits as an asset class.
One is the volatility of this financial instrument. There are also criticisms on how good those credits are in abating global warming.
Add to this another issue on liquidity: carbon credits are illiquid products as digital assets.
This is where 1GCX comes in to offer a solution – tokenizing carbon credits for liquidity.
Marrying Carbon Credits and Cryptocurrencies
Both 1GCX and T3 Trading have tried some related trading pairs marrying equity commodities and cryptocurrencies.
Their main idea is to attract institutions into both markets, including those who are familiar with carbon assets but new to digital assets. They will do this by creating a series of liquidity pools to trim down market transactions.
Both firms believe there’s a strong case for tokenization of carbon credits to build the right marketplace.
The partnership will also provide investors on the 1GCX platform with these new offerings:
- Live spot trading of carbon offsets
- Aiding in the development of automatic over-the-counter quoting
This first-of-its-kind trading platform will improve the transparency of price discovery and real-world utility (fighting climate change) of credits. These are the two difficulties that discourage institutional investors from entering the space.
1GCX tokenizing carbon credits aims to help investors deal with liquidity concerns and murky prices.
- 1GCX is also in its early stages of developing its own blockchain. The system features a token with elements of Proof-of-Stake (PoS) consensus mechanisms.
This staking method is often featured in private, centralized blockchains as opposed to public permissionless systems.
Recently, Ethereum has shifted from an energy-intensive Proof-of-Work system to PoS. The crypto firm claimed that PoS reduced their energy use and carbon footprint by a whopping 99.99%.
Traders using 1GCX have access to ether and other digital assets, such as bitcoin, AVAX and SOL. Its $2 billion deal with T3 Trading, which is the largest so far, has this main goal:
“Creating a digital assets-based market inspired by the green web mixed with the internet of energy.”
In their quest to reach net zero emissions, companies are in dire need for carbon credits. And their growing demand will explode more as the world must decarbonize by 2050.
By adding crypto to the mix of solutions, 1GCX’s new carbon credit trading platform seeks to boost transparency, fair pricing, and liquidity. All the while preventing scams.