Kinexys by J.p. Morgan Advances New Blockchain Application Development for Carbon Markets With S&P Global Commodity Insights, EcoRegistry and International Carbon Registry

Key takeaways

• S&P Global Commodity Insights, EcoRegistry and the International Carbon Registry (carbonregistry.com) are key players in the voluntary carbon market (VCM) and the first counterparties to test Kinexys Digital Asset’s new application under development to help tokenize global carbon credits at the registry layer.

• Kinexys Digital Assets' ongoing application development follows extensive engagement with carbon market participants resulting in the publication of a research paper, exploring the ways in which blockchain technology could deliver value to the ecosystem and potentially facilitate financial innovation across the entire market.

• Since 2015, Kinexys by J.P. Morgan, the firm’s industry-leading blockchain business unit, has been a global provider of blockchain-based infrastructure for the movement of money, assets and information.

Kinexys Digital Assets Develops Blockchain Application for Carbon Markets

Kinexys by J.P. Morgan, the firm’s industry-leading blockchain business unit, is developing a new innovative blockchain application on Kinexys Digital Assets, the firm’s multi-asset tokenization platform, to help tokenize global carbon credits at the registry layer. Exploratory testing is being done with S&P Global Commodity Insights, EcoRegistry and the International Carbon Registry (ICR).

EcoRegistry and the International Carbon Registry (CarbonRegistry.com) have successfully completed testing on their respective registry solutions. S&P Global Commodity Insights will start exploratory testing with its environmental solution Environmental Registry, a customizable registry-as-a-service platform to facilitate better full-lifecycle tracking and management of carbon credits; testing could also eventually include its Meta Registry®.

Global carbon markets face challenges including inefficiencies and a lack of standardization, transparency and market fragmentation. A single, tokenized carbon ecosystem in which credits are portable between sellers and buyers supporting seamless means of settlement could contribute to addressing these barriers.

Alastair Northway, Head of Natural Resource Advisory at J.P. Morgan Payments, said, "The voluntary carbon market is ripe for innovation. Tokenization could support development of a globally interoperable system that adds confidence into 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."

All three companies will initially test the viability of carbon credit tokenization using the application under development on Kinexys Digital Assets, with the aim of enabling external stakeholders to read and action registry data more easily. The testing will focus on account, project and credit lifecycle management, with specific objectives around technical connectivity, data model compatibility and complete functionality.

>> In Other News: The Quiet Rise of Offshore CO2 Storage: North America's Emerging Frontier for Carbon Capture

Jonty Rushforth, Head of Product & Portfolio, Energy Transition at S&P Global Commodity Insights, said, "We’re pleased Kinexys by J.P. Morgan recognizes the value and mission of our Environmental Registry and welcome its exploration of using blockchain technology for asset record keeping and payments with the aim of enhancing operations in the carbon markets and furthering their credibility and reliability. If this collaborative testing progresses as hoped, and eventually includes our Meta Registry®, this could extend our environmental registry infrastructure solutions to the financial industry, creating a transformative carbon market expansion."

Juan Duran, CEO of EcoRegistry, said, "Carbon markets are evolving constantly, and by interconnecting their core elements, we enhance trust and transparency across the ecosystem. Our integration with Kinexys Digital Assets is a key step toward expanding the financial sector’s role in this space."

Oli Torfason, COO of ICR, said, "We’re excited to collaborate with Kinexys by J.P. Morgan on this important step toward a modern, convergent structure for the carbon market. This collaboration reflects a shared commitment to transparency, innovation, and building the infrastructure needed for a high-integrity climate economy."

These significant mandates come as Kinexys by J.P. Morgan publishes a research paper exploring opportunities in the VCM. The report leverages insights from market participants and this milestone.

Key highlights of the report include:

• Building trust and confidence in the VCM: The transparency, traceability and immutability of blockchain technology, alongside the security of bank-grade infrastructure, can contribute to much-needed trust across the VCM.

• Tokenization can act as a catalyst for standardization: To apply tokenization to this market, an asset standard must be developed and agreed upon, which can then be used across the ecosystem at scale.

• There are broader opportunities that must be realized for the VCM to scale: Tokenization is not a fix-all solution and other factors such as digital monitoring, reporting and verification technology are required to improved project quality tracking and transparency. Connectivity to carbon market service providers, including ratings agencies and insurance providers, is also imperative.

Keerthi Moudgal, Head of Product at Kinexys Digital Assets, said, "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."

This is the latest example of JPMorganChase's aim to help accelerate and scale the growth and development of carbon markets. In 2023, the firm released its Carbon Markets Principles, summarizing its perspective on the role that the voluntary carbon market plays, current market challenges, and how JPMorganChase is working to support and leverage a more effective carbon market.

For more information about Kinexys Digital Assets, click here and read more in Bloomberg.