Kinexys by J.P. Morgan is developing a blockchain application designed to tokenize global carbon credits, part of an effort aimed at improving trust, transparency and efficiency in the voluntary carbon market, the firm said on Wednesday.
The financial giant’s blockchain unit is conducting exploratory testing with S&P Global Commodity Insights, EcoRegistry and the International Carbon Registry through its Kinexys Digital Assets platform, which supports multi-asset tokenization.
“The voluntary carbon market is ripe for innovation,” said Alastair Northway, head of natural resource advisory at J.P. Morgan Payments. “Tokenization could support development of a globally interoperable system that adds confidence in the integrity of the underlying infrastructure.”
Addressing Fragmentation and Inefficiencies
Global carbon markets face structural challenges, including market fragmentation, inefficiencies, and inconsistent standards. By tokenizing carbon credits at the registry level, J.P. Morgan aims to create a unified digital ecosystem in which credits are more portable and settlements more seamless.
EcoRegistry and ICR have completed preliminary tests on their registry platforms, while S&P Global Commodity Insights is preparing to begin testing its Environmental Registry, a customizable registry-as-a-service solution. Future testing could extend to its Meta Registry, a broader infrastructure tool for environmental assets.
“If this collaborative testing progresses as hoped … this could extend our environmental registry infrastructure solutions to the financial industry, creating a transformative carbon market expansion,” said Jonty Rushforth, head of product & portfolio, energy transition at S&P Global Commodity Insights.
Building Toward Full Lifecycle Management
Initial testing on Kinexys Digital Assets will evaluate the viability of tokenizing carbon credits by focusing on account, project, and credit lifecycle management.
The trials aim to assess technical connectivity, data compatibility, and full feature functionality.
“Carbon markets are evolving constantly, and by interconnecting their core elements, we enhance trust and transparency across the ecosystem,” said Juan Duran, CEO of EcoRegistry.
Oli Torfason, COO of ICR, added, “This collaboration reflects a shared commitment to transparency, innovation and building the infrastructure needed for a high-integrity climate economy.”
Research Report Outlines Market Opportunities
The announcement coincides with the release of a new Kinexys research paper outlining the potential for blockchain in the VCM.
Key findings include the role of tokenization in building market trust, the need for a standardized asset model, and the importance of complementary technologies such as digital monitoring and ratings services.
“We are excited to continue engaging with carbon market participants to build and implement new blockchain-based technology,” said Keerthi Moudgal, head of product at Kinexys Digital Assets.
The initiative follows JPMorganChase’s 2023 release of its Carbon Markets Principles, which defined the bank’s role and strategy in developing more effective carbon markets.
