Project Genesis 1.0: prototype digital platforms for green bond tokenisation

In many countries, 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. For those investing in environmentally friendly projects, there is uncertainty about whether the bond issuer is delivering the positive green impact it committed to at issuance. Also, there are typically no liquid and transparent secondary markets for retail investors.

The BIS Innovation Hub and the Hong Kong Monetary Authority (HKMA) successfully developed two prototype digital platforms that bring to life the vision that an investor can download an app and invest any amount into safe government bonds, which will develop a green project. Over the bond's lifetime, the investor can not only 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 the investment. Further, the investor can sell the bonds in a transparent market.

Overview of Project Genesis

The Innovation Hub and HKMA completed two prototypes in conjunction with private sector consortiums: 

The first prototype simulates the life cycle of a typical bond on a permissioned distributed ledger platform, including origination, subscription, settlement and secondary trading. The prototype was able to considerably streamline these processes.

second prototype tested the same procedures using a public permissionless blockchain infrastructure. It also managed to streamline the investor onboarding and facilitated the direct payment and settlement between the issuer and investor.

The BIS Green Swan research report maintained that climate change involves complex collective action problems that require increased coordination among governments, private sector, civil society and international community. In line with this takeaway, Genesis was guided by a multi-disciplinary panel of experts in environmental, social and governance (ESG) issues, green finance, bond markets, law and regulation. A report which was written by the panel members, offers a broad perspective on how finance can drive the transition to a green and sustainable future.

Links to the three published reports and videos of the two prototypes can be seen on the publications page.