Govt creating carbon credit regulatory, legislative framework

As the government moves to monetize The Bahamas’ carbon credits, it is shoring up the legislative and regulatory framework needed to fully exploit the market.

Minister of Economic Affairs Michael Halkitis said the government will soon debate the Climate Change and Carbon Market Initiatives Bill, 2022, which was tabled earlier this year, along with carbon credit secondary markets trading legislation currently being developed by the Securities Commission of The Bahamas.

“Carbon markets with high-quality carbon credits and offsets could play a vital role in helping countries with the decarbonisation of the global economy, while also 

providing substantial economic benefits. The Securities Commission reviewed and benchmarked seven jurisdictions to determine how The Bahamas can develop and implement an international voluntary carbon credit trading market,” Halkitis said as he contributed to the debate on the 2022/2023 annual budget in the Senate yesterday.

“The intention is to create a carbon credit regulatory framework that would allow for the cross-border trading of carbon units, which ultimately can assist in reducing The Bahamas’ greenhouse gases footprint, fulfilling its obligations under the Paris Agreement and increasing direct and indirect economic and financial opportunities.”

The Davis administration is pioneering the exploitation of blue carbon credits, which would allow entities to purchase this jurisdiction’s unique carbon credits to offset their own carbon emissions.

Carbon credit experts have estimated that The Bahamas could benefit as much as $375 million from carbon credits per year.

In April, the government admitted that the regulatory and legislative framework needed for The Bahamas to fully maximize its position in the carbon credit space was insufficient. It is believed that once the rules and regulations are passed, and proper scientific mapping is complete, The Bahamas could achieve monetization within 12 to 18 months.

Alongside carbon credit trading legislation, the Securities Commission of The Bahamas is spearheading a number of initiatives to advance transformation in the financial services technology space, Halkitis said.

“The Securities Commission of The Bahamas is reviewing the position of global standards setters and leading regulators to update DARE [Digital Assets and Registered Exchanges Act] to address key issues and opportunities that are emerging in the digital assets space. Stable coins are a hot button issue globally, due to their potential application as a means of payment and the ensuing potential that they may someday pose a threat to financial stability. The government is looking at issues around disclosure and valuation, as well as other investor and consumer protection issues. We expect to expand the DARE Act to address these critical issues and raise the standards for registration of this specific type of digital asset,” he said.

“As a part of the review of DARE, the government is looking to address the regulation of non-fungible tokens, or NFTs as they are known. NFTs are a focus in the digital assets space, used for trading, artwork, collectibles, and in Web3 and Metaverse applications. These products are sometimes consumer assets, sometimes financial assets and sometimes they can start as a consumer asset and turn into financial assets as they become collectibles. Providing regulatory clarity around them has the potential to distinguish The Bahamas in the space, and potentially significantly expand the opportunities for digital assets business growth in The Bahamas.”

Halkitis said the government also intends to address decentralized finance (DeFi) in the coming fiscal year, to ensure all regulatory issues are addressed.

“DeFi has great potential to disrupt finance, but there are many regulatory issues that must be addressed, including consumer protection issues. Regulators must also look at unique issues that may arise as a result of the lack of intermediaries and how they will continue to ensure market integrity, which is critical for the functioning of the financial system,” he said.

“For exchanges and custodians that use clients assets for the purpose of staking, we are looking to address minimum disclosures that must be made to clients, along with other issues related this topic.”

Also included on the legislative agenda in the upcoming fiscal year are updates to the Securities Industry Act, to make it more applicable to today’s market; and changes to the Investment Funds Act, 2019, to include clarification around closed end funds, the requirements that apply to licensees, defining the launch of a fund as the date the investment fund was issued, and amending the regulatory regimes for investment managers to clarify any overlap with the Securities Industry Act.

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Paige McCartney

Paige joined The Nassau Guardian in 2010 as a television news reporter and anchor. She has covered countless political and social events that have impacted the lives of Bahamians and changed the trajectory of The Bahamas. Paige started working as a business reporter in August 2016. Education: Palm Beach Atlantic University in 2006 with a BA in Radio and Television News

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