JPMorgan has announced that its blockchain business unit, Kinexys, is developing and testing a new blockchain application aimed at tokenizing global carbon credits. This initiative seeks to tackle key standardization and transparency challenges that are hindering the voluntary carbon market (VCM). The company is collaborating with S&P Global Commodity Insights, EcoRegistry, and the International Carbon Registry (ICR) to trial carbon credit tokenization on their respective registries.
As the demand for carbon offset projects and related credits is anticipated to grow significantly in the coming years, companies are increasingly using credits as a bridge to their absolute emissions reduction efforts or to balance emissions that are difficult to avoid. The market, which is largely unregulated and expanding rapidly, faces several challenges such as a lack of standardization, transparency, and market fragmentation.
JPMorgan suggests that a unified, tokenized carbon ecosystem could address these issues by providing a system where credits can be easily transferred between buyers and sellers. Blockchain technology would facilitate asset record-keeping and payments, enabling users to access and act on registry data.
Alastair Northway, Head of Natural Resource Advisory at J.P. Morgan Payments, stated, “The voluntary carbon market is ripe for innovation. Tokenization could support the development of a globally interoperable system that adds confidence to the integrity of the underlying infrastructure. This technology could support greater information and price transparency, which could ultimately lead to greater liquidity in the market.”
In collaboration with the three companies, each will initially test the viability of carbon credit tokenization using the application under development by Kinexys. The testing will focus on aspects such as account, project, and credit lifecycle management, with specific objectives around technical connectivity, data model compatibility, and complete functionality.
JPMorgan reported that EcoRegistry and the International Carbon Registry have successfully completed testing on their respective registry solutions. Meanwhile, S&P will commence exploratory testing with its environmental solution, Environmental Registry. The testing may also involve S&P’s Meta Registry, which connects environmental registries globally with carbon markets and their participants.
Keerthi Moudgal, Head of Product at Kinexys Digital Assets, commented, “We are excited to continue engaging with carbon market participants to build and implement new blockchain-based technology for this ecosystem, as ongoing engagement is central to our product development. We look forward to seeing the promise of tokenization come to fruition and the transformation of the voluntary carbon market from the ground up.”