Blockchain and cryptocurrency made a long way in gaining the trust of millions of people. Things took a backseat for the crypto industry this year as it lost 2/3rd of its value, and the recent fall of Sam Bankman-Fried just made things worse. People who were already on the wall about the crypto world would think twice before entering back, and many people had their ‘I told you so!’ moments. The underlying blockchain technology however is proving its worth as a viable solution for countless applications, including green bonds for climate solutions.
Goldman Sachs on Blockchain
In COP27, Rosie Hampson, Goldman Sachs’s Executive Director, talked about the benefits of tokenization. The Wall Street Bank has shaken hands with institutions like the Bank for International Settlements, Hong Kong Monetary Authority, and others. This partnership aims to launch Genesis, a capital markets initiative. Genesis intends to utilize digital tokenization and blockchain to aid climate-related bond investors in live-tracking the associated carbon credits.
Blockchain’s Role in Greenification
HashCash chief and noted blockchain pioneer Raj Chowdhury once mentioned, “ The uphill battle for saving our environment is not possible without technology and smart application of existing resources. We need breakthrough innovations built on the foundation of available tools, as consumer awareness and investment are already present.”
In regards to the Genesis initiative, Hampson mentioned the group plans to support green bond contracts using IoT devices and blockchain-powered smart contracts. This initiative will create a revolutionary process for primary issuance, secondary market component, asset servicing, and more. What is the advantage of this green future for big guns? Well, in today’s market, finding investors for green bonds is pretty hard. But, attaching the future carbon offset with tokenization will increase its attractiveness to investors.
Blockchain For Green Activists Is Like Ice Cream With Bacon
Ever since the beginning of blockchain, green activities have been against it. On the other side of the battlefield, think about the persona of a typical cryptocurrency investor. He is more likely to be an anti-establishment evangelist who showed interest in cryptocurrency because it evades the central bank’s radar.
However, many governments have shown interest in utilizing blockchain over the last few years. The World Bank has taken the opportunity to create a carbon credit registry utility with a blockchain system. This utility is named Chia. Meanwhile, mainstream banks are trying out ways to make bank-to-bank central bank digital currencies practical. For instance, the People’s Bank of China, HKMA, and other banks are building the mBridge Project. This project will help the banks swap assets. Similarly, Banque de France created Project Jura with the Swiss National Bank. Jura will be a pilot foreign exchange CBDC.
How Practical Are These?
All these are just Green Future pilots and initiatives. Ousmene Mandeng, an Accenture Consultant, mentioned that many experiments are going on with distributed ledgers, tokenization, and cryptography. What we need is an entirely new architecture to accommodate these needs. So, will the scandals and imploding of the crypto market affect the investors of these projects? Apparently, the major players of these experiments are emphasizing that they are taking extensive establishment oversight to solve real-world issues.
For instance, Genesis is aimed to create a better solution for tracking potential greenwashing. Moreover, the transparency in this field is quite shady. Chinese issues have sold 300 billion USD of green bonds. The carbon credits market is quite opaque. A coordinated, distributed computerized ledger would help avoid double counting and better verification of carbon credits at the source. Digital tokenization also aids in simplifying the distribution and breaking the bonds into miniature fractions.
Can These Bypass Digital Asset Technologies?
The simple answer is yes. Banks can think of ways to sell these fraction bonds with the legacy systems. However, creating a singular global ledger by collaborating with the public sector and others is another way. Then again, the term ‘cryptocurrency’ could trigger much stigma for the legacy players, and even if the blockchain never gets adopted to scale, the initiatives will be successful. Interestingly, the green future might lie in the hands of tokenization.
Although crypto is on a downward trend, the quest for viable blockchain applications will never stop. It is not long before blockchain becomes the backbone for several essential market elements. These do not make mainstream investors suddenly adopt crypto overnight. There would still be friction and stigma. It is not new; remember how people protested against the railways or the internet when they were introduced?