JPMorgan is piloting a project to tokenize the carbon credits on blockchain in a bid to enhance transparency, efficiency, and demand in the international carbon markets.

JPMorgan Chase & Co. continues developing its blockchain strategy by opening a pilot of tokenizing carbon credits with S&P Global Commodity Insights, EcoRegistry, and the International Carbon Registry. Kinexys, the blockchain arm of JPMorgan, is spearheading the initiative, which will allow mapping carbon offsets to the blockchain in order to create greater transparency and efficiency.

The pilot will ask the question about whether it is possible to trace the entire lifecycle of carbon credits through registry systems using blockchains, i.e., through their issuance and retirement in the registry systems. The tokenization of such data aims to address some of the most significant issues of the carbon trading market, such as an inability to standardize, a dispersed ecosystem, and a low confidence level in the market.

The buzz of Wall Street has become blockchain, which provides transfer of assets much faster and more secure. JPMorgan thinks a blockchain-powered carbon credit platform would increase trust, liquidity, and portability to foster a carbon marketplace where different carbon markets are globalized and interchangeable with one another.

One ton of CO₂ either taken out of the atmosphere or locked out of it would be symbolically represented by a tokenized carbon credit, which is issued on blockchain. The move is regarded as a possible solution to time-honored inefficiency and green-washing issues in the voluntary carbon market.

Although the company has already failed and the market is not so convinced about its possibilities, JPMorgan is still confident. In a recent publication, the bank stated that a carbon market cannot develop and evade future stagnation without a blockchain innovation.