Most jurisdictions decided years ago that a carbon credit was a commodity, a piece of property, or nothing much at all, and then spent the following decade arguing about it in court. The Gelephu Mindfulness City Special Administrative Region took a different route. Its Financial Services Act 2025 lists environmental instruments among the specified investments, alongside shares, debt instruments, units in collective investment funds and structured products. That single drafting choice pulls carbon into the regulatory perimeter from the outset, and it is the most consequential green law in the city that almost nobody has read.
In short
- Environmental instruments are a specified investment under the Financial Services Act 2025, so dealing, arranging, advising on and providing custody of them can be regulated activities requiring a licence from the Gelephu Financial Services Office.
- The definition covers three things: emissions allowances under a trading scheme, instruments attesting to the reduction or removal of greenhouse gases (carbon credits or equivalent), and instruments attesting to the environmental attributes of an underlying unit, such as renewable energy certificates.
- The statute is technology neutral and registry agnostic. An instrument counts where it is recognised by the regulator, so recognition is the first question to raise with the regulator.
- Green Energy and Technologies, and Finance and Digital Assets, are two of the eight priority industries GMC has published. The convergence of the two is not an accident of drafting.
- The power base is hydro. Bhutan's grid is built on hydropower, and the same resource that once supported state bitcoin mining is what makes a green compute and clean energy proposition credible.
- Tax follows the ordinary rules. The company rate is 15%. Zero is available by approval for a founders company in an approved founders industry, and a concessionary rate of not less than 5% for an approved strategic and development company. Both approval routes close on 31 December 2030.
What the statute says
The Financial Services Act 2025 defines an environmental instrument as a financial instrument that is recognised by the regulator and which does one of three things. It may entitle its holder to emit greenhouse gases into the atmosphere in accordance with an emissions trading scheme, which captures allowances and their equivalents. It may attest to the reduction or removal of greenhouse gases, which is the classic carbon credit. Or it may attest to the environmental attributes of an underlying unit, which is the family of renewable energy certificates and environmental attribute certificates.
That drafting is deliberately technology neutral and registry agnostic. It does not say the credit must be issued by a named standard-setter. It does not distinguish between a removal and an avoidance credit. It does not care whether the instrument is recorded in a legacy registry or on a blockchain. What it does insist on is recognition by the regulator.
Because an environmental instrument is a specified investment, the regulated activity definitions in the Act attach to it. Dealing in investments as principal and dealing in investments as agent both become live where the instrument is the subject of the deal. Arranging deals in investments catches the broker and the matching platform. Advising on investments catches the adviser who recommends a purchase or a sale. Providing custody and arranging custody catch the firm that holds the instrument or the means of access to it for another. Managing assets catches the discretionary manager running a carbon portfolio. Operating a multilateral trading facility or an organised trading facility catches the exchange.
None of this bites unless the activity is carried on by way of business in or from GMC, and the Act contains a long list of exclusions. A company issuing its own instruments, a group or joint enterprise arrangement, activity carried on in the course of a profession or a non-investment business where it is incidental, dealings with or through a licensed firm, and introducing are all addressed in the exclusions. The exclusions are the difference between a regulated carbon trading desk and an unregulated corporate procurement team buying credits to retire against its own footprint. They repay careful reading in every case.
Why recognition by the regulator is the pivot
The definition is conditioned on recognition. An instrument that meets one of the three limbs but is not recognised by the regulator does not become a specified investment by its own virtue.
The advantage is that GMC has not welded its law to any private standard that may lose credibility. A jurisdiction that writes a registry's name into its statute inherits that registry's reputation. GMC has kept the decision in the regulator's hands, where it can move at the pace of the evidence.
Recognition is a question for the Gelephu Financial Services Office. A firm building a carbon business in GMC should treat the recognition question as a threshold item to raise at the initial meeting with the regulator, not as a detail to resolve after incorporation.
Where clean energy meets digital assets
GMC has published eight priority industries. Two of them are Green Energy and Technologies and Finance and Digital Assets. The proposition GMC is making is that these two belong in the same place.
The physical argument is straightforward. Bhutan's electricity is overwhelmingly hydroelectric, generated from the rivers that fall out of the Himalaya. It was that resource that allowed Bhutan to become one of the earliest sovereign bitcoin miners, with holdings managed by Druk Holding and Investments. According to on-chain analysis reported in April 2026, those holdings fell from roughly 13,000 bitcoin in October 2024 to about 3,954 by April 2026, with mining inflows apparently dormant. That is a story about monetising a position to fund national infrastructure, not about a country still accumulating. Separately, in December 2025 a Bitcoin Development Pledge allocated up to 10,000 bitcoin from national reserves to support GMC's development, structured as a long-term sovereign reserve intended to generate yield without selling the assets.
The point for a green business is not the bitcoin. It is that the electricity is real, it is renewable, and the state has already demonstrated it will put that electricity behind compute. For an energy-intensive business with a decarbonisation mandate, a grid built on hydro is a fact you can put in front of your own investors.
The regulatory argument is the interesting one. GMC's financial services framework treats environmental instruments and virtual assets under a single statute and a single regulator. A tokenised carbon credit in GMC does not fall between two agencies. If the token is an environmental instrument recognised by the regulator, the instrument analysis applies. If the arrangement is a fund, the fund rules apply. If the platform matches third party orders, the trading facility analysis applies. There is one perimeter and one supervisor.
GMC has been building that record in public. In September 2025 Matrixport received a financial services licence from the GMC Authority. In December 2025 a gold-backed token called TER launched on Solana under a GMC sovereign framework with custody by DK Bank, and Matrixport's tokenisation arm Matrixdock was appointed as key technology provider for TER's tokenisation infrastructure. In May 2026 BTSE Bhutan received in-principle approval from the Gelephu Financial Services Office for operating a multilateral trading facility for virtual assets and for providing institutional-grade custody.
A jurisdiction that has licensed a tokenisation provider and a custodian is a jurisdiction that can be asked, credibly, to recognise a tokenised environmental instrument.
The tax position
The Income Tax Act 2025 charges companies at 15% on chargeable income.
There are two approval routes away from that number. An approved founders company is exempt on income from a qualifying business in an approved founders industry, which the designated officer may approve where the industry is not carried on in GMC on a scale adequate to its economic needs and has favourable prospects for development. The total exemption period, including extensions, cannot exceed 15 years. An approved strategic and development company pays a concessionary rate specified in its letter of approval, which must be not less than 5%, for a relief period that with extensions cannot exceed 20 years. Both routes close to new approvals on 31 December 2030.
A genuine clean energy or environmental markets business entering a city that has named Green Energy and Technologies a priority industry has a serious case to make on the founders industry test, and the case is made and approved in writing, in the prescribed form.
Property law and power terms
On the property law questions that carbon markets raise everywhere, namely what a credit is as a matter of property, how it is transferred, and what happens on the insolvency of a custodian or registry operator, GMC applies the received common law and equity of established common law jurisdictions, so far as suited to its circumstances and subject to GMC enactments. GMC courts can rely on common law precedents from any common law jurisdiction, so a party has a settled body of case law to reason from.
On the energy side, grid connections, tariffs and power purchase terms for a large industrial load are commercial matters negotiated with the Economic Development Group.
Frequently asked questions
Do I need a licence to trade carbon credits in GMC?
The answer is that it may. Environmental instruments are a specified investment under the Financial Services Act 2025, so dealing as principal or agent, arranging deals, advising and providing or arranging custody can each be regulated activities where carried on by way of business. Whether your specific model needs a licence depends on the activity, the exclusions and whether the instruments are recognised by the regulator.
Which carbon standards does GMC recognise?
An environmental instrument must be recognised by the regulator to fall within the definition, and that recognition is a matter for the Gelephu Financial Services Office.
Are renewable energy certificates covered?
The definition includes financial instruments that attest to the environmental attributes of an underlying unit, and gives renewable energy or environmental attribute certificates as the example. Recognition by the regulator is still required.
Is a tokenised carbon credit treated as a virtual asset or as an environmental instrument?
GMC regulates both traditional financial services and virtual assets under one statute and one regulator, so the question is which definition the instrument satisfies rather than which agency has jurisdiction. The analysis turns on the rights the instrument confers, not on the technology used to record it.
Does a green business get 0% corporate tax in GMC?
The company rate is 15%. Full exemption is available by approval as a founders company in an approved founders industry, and a rate of not less than 5% by approval as a strategic and development company. Both approval routes close on 31 December 2030.
The bottom line
GMC has done something quietly sophisticated: it has put carbon inside the financial regulatory perimeter at the start, in the same statute and under the same regulator as securities and virtual assets, while refusing to bind itself to any private registry. That gives a serious environmental markets business something it cannot easily get elsewhere, which is a single supervisor for a tokenised carbon book, sitting on a hydro grid, in a city that has named green energy a priority industry. Raise the recognition question with the regulator first, before you incorporate, and build the tax case on the founders industry test.
This article is general information about the law of the Gelephu Mindfulness City Special Administrative Region as at the date above. It is not legal advice and does not create a lawyer-client relationship.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
Sources
- Financial Services Act 2025 (Law No. 5 of 2025): Schedule 1 Part 3 paragraph 99B (environmental instruments); Schedule 1 Part 2 paragraphs 4, 12, 16, 28, 43, 46, 54, 56 (regulated activities); Schedule 1 Part 1 paragraph 3 (by way of business); Schedule 1 exclusions including paragraphs 5, 6, 8, 13, 25, 75, 77, 79.
- Income Tax Act 2025 (Law No. 6 of 2025): s.43(1)(a); s.13Y; s.43D.
- Application of Laws Act 2024 (Law No. 1 of 2024): ss.3 to 5 and Schedules A and B.
- CoinDesk reporting on Bhutan's bitcoin holdings, April 2026 (https://www.coindesk.com)
