KUALA LUMPUR (April 30): Labuan International Business and Financial Centre (Labuan IBFC) is preparing to announce a "carbon credit circular" to be issued next week, in preparation for the establishment of a digital carbon credit exchange.
The circular will provide regulatory clarity to market participants interested in setting up or participating in carbon credit transactions, said Labuan Financial Services Authority (Labuan FSA) director general Nik Mohamed Din Nik Musa. Labuan FSA oversees Labuan IBFC.
“We’re looking to set up a carbon credit guidance exchange where we want players to apply for a licence from us,” Nik Mohamed Din said during a press conference after the launch of the Labuan International Business and Financial Centre 2024 Market Report.
The establishment of a digital carbon credit exchange, designed to support the issuance, trading and regulation of carbon credits, is part of the Labuan IBFC Sustainability Taxonomy (LiST), which aims to encourage green financial instruments and align the centre with Malaysia’s broader climate commitments.
“Those interested in setting up a carbon credit exchange would have more clarity and certainty on how they can structure and operate their businesses using Labuan’s ecosystem,” he said.
The remark came as Malaysia sees growing emphasis on sustainable finance and environmental accountability.
In December 2022, Bursa Malaysia launched the Voluntary Carbon Market (VCM) via its Bursa Carbon Exchange (BCX), allowing businesses to offset emissions by purchasing carbon credits.
Nik Mohamed Din added that Labuan IBFC’s move to establish its own digital carbon credit exchange complements the domestic agenda by offering cross-border and digital capabilities through a regulated offshore platform, potentially attracting global players seeking a flexible yet credible market infrastructure for carbon trading.
Digital financial services is one of Labuan IBFC's pillars in its five-year roadmap initiatives from 2022 to 2026 to position itself as a niche financial centre, aside from its strong presence in Islamic finance and captive insurance.
The financial centre, Nik Mohamed Din said, has achieved 76.5% of the five-year roadmap as at end-2024, based on a mid-term review conducted by an independent consultant.
“We want to distinguish ourselves from other centres globally. That includes strengthening our Islamic digital asset ecosystem through initiatives like the Islamic Digital Asset Centre,” said Nik Mohamed Din.
Should Labuan IBFC fall short of achieving 100% of its roadmap targets by 2026, Labuan FSA would issue a "transparent report card" to disclose accomplishments, challenges and planned adjustments for its next phase of development, he added.
“We are already moving ahead with our post-2026 strategy. The team has begun planning the next roadmap in consultation with industry stakeholders,” he said.