Startup Cryptocurrency Lending Platform Raises $2 Billion to Tap ‘Energy Internet’

  • No partnership has raised close to $2 billion for a range of marketing products spanning both asset classes.
  • Tokenized carbon credits reflect aspects of structured products, commodities and related derivatives

Meet carbon offset credits, crypto.

1GCX, an exchange and carbon credit liquidity provider focused on digital assets, and T3 Trading, a private trading firm investing in the space, have raised $2 billion in funding and entered into an agreement creating a $100 million liquidity pool to facilitate carbon credit transactions.

The firm’s executives exclusively told Blockworks that the move, made possible by unprecedented fundraising for tokenized carbon credits, was spurred by growing interest in the securities from institutional investors. Such securities—proponents say—facilitate the ability of institutional investors, including pension plans and endowments, to put their money where their mouth is in terms of generating measurable alpha from ESG investment products.

As an asset class, however, fractionalized carbon credits carry a lot of risk: The financial instruments are highly volatile, and the verdict is still out on how good they are at stemming widespread global warming, according to critics. Despite coming with sharper ups and downs in terms of price, the glaring absence of liquidity can’t be overlooked given that offset trading is more like illiquid structured products than anything else in digital assets.

Enter 1GCX, providing the infrastructure for an ambitious new trading platform.

T3 moves millions of dollars of capital between a number of major cryptocurrency exchanges and also puts money to work in commodity markets. Both firms additionally specialize in equity derivatives and have introduced a number of linked synthetic trading pairs that combine commodities with cryptocurrencies. The exact terms of the contract have not been disclosed.

The idea is to create a series of liquidity pools and related over-the-counter (OTC) market-making activities that reduce the spread of such transactions to attract institutions, including carbon-hungry traditional financial institutions, to markets. assets, but are still learning when it comes to digital assets.

RA Wilson, Chief Technology Officer, 1GCX

RA Wilson, 1GCX’s chief technology officer, told Blockworks that the company has been conducting due diligence on the initiative for several years on the feasibility – and cost – of quantitative implementation. This was especially suggested after discovering that there were virtually no other market makers serving retail and accredited investors in terms of pairing digital assets with real-world commodities, plus derivatives.

Even now, according to Wilson, liquidity mainly consists of bulging bracket banks that capture large amounts of carbon securities at discounted prices and then act as informal markers for counterparty trading firms. Banks probably get a nice spread for doing this, given that such trades are essentially de facto OTC.

Tokenization work

Wilson, who has personally invested in cryptocurrency since 2011, said that companies see the products that way, even though carbon credits, promoted and in some cases backed by tax credits, gained momentum about five years ago by governments, including the United States. not the “currency” the tools are meant to be, but rather a good effort.

“Business development starts with building the right market, making sure liquidity, high-quality offsets and nature-based solutions are available,” Wilson said. “Dividing financial assets away from land-based projects can actually benefit us globally.”

1GCX is also in the relatively early stages of developing its blockchain, which has a token that draws parallels between “proof of authority” and algorithmic “computational proof of authority.”

Proof of authority is a transaction signing method that incorporates elements of stake-of-stake consensus mechanisms, but relies on validators that provide identity or reputation. It is typically hosted on private, centralized blockchains rather than on public permissionless systems.

The ultimate goal: to build a market based on digital assets driven by the emerging “green internet mixed with energy internet”.

In turn, the first installation would ideally increase the transparency and real-world utility of price discovery in terms of tackling climate change – two common thorn in the side of institutional investors who have had to rely on Wall Street and the US until now. The Chicago-based exchange will trade in illiquid carbon credits, which are market-makers’ shadow prices.

Traders using 1GCX already have access to a number of digital assets such as bitcoin, ether, AVAX and SOL.

According to Wilson, there is already “tremendous demand” from institutions hungry for carbon offset credits, and it’s growing every year. Launching a trading platform should increase liquidity, transparency and fair pricing while also fighting fraud, he said, adding cryptocurrency to the mix.

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  • Michael Bodley

    Management editor

    Michael Bodley is a New York-based managing editor for Blockworks, where he focuses on the intersection of Wall Street and digital assets. He previously worked for the institutional investor newsletter Hedge Fund Alert. His work has appeared in The Boston Globe, NBC News, The San Francisco Chronicle and The Washington Post. Contact Michael via email [email protected]

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