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Abu Dhabi to launch world’s first regulated carbon credit trading exchange and clearing house

Abu Dhabi Global Market (ADGM), the International Financial Centre in Abu Dhabi, has partnered with AirCarbon Exchange (ACX) to create the world’s first fully regulated carbon trading exchange and carbon clearing house which will be established in Abu Dhabi, the capital of the UAE.

Pursuant to its recently released consultation paper, ADGM is set to become the first jurisdiction globally to regulate carbon credits and offsets as emission instruments, and to issue licenses for exchanges to operate both spot and derivative markets.

The regulatory framework will allow corporations to trade and finance carbon credits like conventional financial assets, thus increasing participation and investment in global carbon reduction and offset programmes.

Expected to launch in 2022, ACX will be established as a Recognised Investment Exchange (RIE) and regulated by ADGM. As a regulated RIE, ACX aims to offer its market participants and customers efficient trading and a regulated transparent price discovery mechanism.

In addition, ACX aims to set up a regulated Recognised Clearing House (RCH) – which will be known as ACX Clearing Corporation – for the purposes of custodising, clearing and settling commodities and commodity derivatives.

ACX intends to initially use its distributed ledger technology within a traditional commodity trading construct to create tokenised carbon credits for spot trading. At a later stage, ACX plans to offer carbon credit futures as commodity derivatives for trading. All digital tokens will be custodised by the RCH, settled and cleared using the RCH’s blockchain smart contracts providing efficient settlement for all spot transactions.

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