Blockchain can have a green future regardless of crypto

This month does not seem to be the perfect moment for an institution like Goldman Sachs in order to work for the advantages of "blockchain" or "tokenization". After all, these keywords initially became famous in the cryptocurrency sector, which lost two thirds of its value last year. And the latest implosion of Sam Bankman-Frieds FTX empire will probably cause many traditional financiers to shy away from digital assets-if not, mock them as fraud.

When Green activists, politicians and scientists gathered on the COP27 this month, Rosie Hampson, a managing director of Goldman Sachs, spoke happy about both. In the past few months, Wall Street Bank has teamed up with the Hong Kong Monetary Authority, the Bank for International Payment Compensation and other financial institutions in order to start a capital market initiative called "Genesis" (a name that it unfortunately shares with the battered crypto broker). This Genesis aims to use blockchain and digital tokenization to help investors who buy climate -related bonds, to help to pursue the associated emission certificates in real time.

"[with] At Genesis, we think about how to use blockchain, smart contact technology and IoT devices to support Green Bond contracts," said Hampson at a cop side event. She noticed that this was the process from "book creation to the first edition, administration of assets and.. The secondary market component."

or how Bénédicte Nolens from BIZ recently repeated in a podcast: "It is actually difficult to sell a green bond [Today]. But if you can attach future CO2 compensation [with tokenization] then it will be much more attractive for the end investor."

This did not cause a splash at COP. Maybe no surprise. Many green activists have hate the entire concept of blockchain technologies since early iterations of this winding energy. And the kind of young (similar) anti-establishment evangelists who have plunged into cryptocurrencies in recent years does not like the idea of ​​participating in the central bank in general.

But investors should be careful. Because while Genesis is still only a pilot project, it symbolically stands for a much larger point: Although the crypto collapse has faltered investors, he has not stopped the experiments with blockchain and tokenization.

In addition, they now reach some unexpected places with growing state support. The World Bank is currently developing a utility for carbon credit register that uses a blockchain system called Chia. And in the mainstream central banking, tests for digital central bank currencies in wholesale (i.e. from bank to bank) are currently running.

The HKMA, for example, is currently working with the People’s Bank of China and other central banks on a so-called MBRIDGE project to enable them to immediately exchange assets. In Europe, the Banque de France and the Swiss National Bank presented the Project Jura, a CBDC pilot project for foreign exchange.

And although these initiatives are still pilot projects, they represent “a completely new architecture”, as Ousmène Mandeng, a consultant of Accenture, recently said at a meeting of the Euro 50 group in Washington. Or like Adrian Tobias from the IMF repeated: "The most important things we got from crypto are the ideas of tokenization, cryptography and distributed main books. They are very important technologies and it is experimented a lot."

It is not surprising that the actors who drive these experiments strive to distance themselves from scandals such as the FTX implosion by emphasizing that they operate with a comprehensive supervision of the establishment. They also emphasize that they are trying to use these technologies to solve real problems - instead of simply using them for their own sake.

The Genesis initiative, for example, tries to solve the problem that the market for CO2 certificates today is so fragmented and opaque that it is difficult for investors to pursue potential greenwashing. Although Chinese issuers sold green bonds worth $ 300 billion, transparency in this regard is very low.

By using a coordinated distributed computer -based high -altitude (i.e. blockchain), the BIZ and Goldman Sachs say that it would be possible to avoid double counts and to check the carbon credits at the source. Similarly, digital tokenization should enable the distribution of bonds to simplify and to lure small investors into the market for the first time by disassembling bonds into tiny fragments. This is how the argument goes.

could this be done without digital-asset technologies? Perhaps. Banks could theoretically sell breasts from green bonds with existing processes. You could also be able to create a single computer -aided global general book for carbon credits if you work together and with the public sector.

But the hard truth is that these reasonable initiatives are currently not available, while the mere emergence of cryptocurrency triggers a rethink of existing practices in both old actors and digital evangelists. And this can ultimately lead to advantages, even if the blockchain itself is never introduced to a large extent.

This will make mainstream investors no less suspicious of crypto. But it illustrates a bigger topic: if there have been disruptive technologies in the past, be it the railway or the Internet, the consequences of the first order are not always important. It is still too early to assess whether digital assets change the world - or can make it greener.

gillian.tet@ft.com