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After years of reputational setbacks, fragmented standards and falling liquidity, the voluntary carbon market (VCM) may be heading toward a new phase shaped by digital infrastructure and emerging international compliance rules.
A new report published by JPMorgan Chase & Co.’s blockchain unit, Kinexys, argues that native tokenization and institutional-grade blockchain systems could help restore transparency, standardization and investor confidence across global carbon markets.
The report, Carbon Markets Reimagined: Scale, Resiliency, and Transparency through Digital Assets, draws on interviews with approximately 40 experts across 15 carbon market and financial institutions.
The findings arrive as the VCM continues to struggle with weak demand following years of criticism over low-quality offsets, opaque pricing and concerns about greenwashing.
Transparency and Standardization Remain Core Obstacles
According to the report, the current slowdown in voluntary carbon trading reflects more than cyclical weakness. Interviewees identified insufficient demand as the market’s central challenge, driven largely by poor data transparency, fragmented registries and the absence of universally accepted quality standards.
Today, many key credit attributes remain embedded in non-standardized PDF documents scattered across multiple registries, making independent verification expensive and time-consuming for institutional buyers. Most carbon credits are also traded over the counter (OTC), with limited public price disclosure, complicating risk modeling and project financing.
“Price transparency is really critical to get participants into the market,” the report quoted Fintan West, Executive Director at J.P. Morgan’s NRG Payments Advisory, as saying.
The report argues that blockchain-based infrastructure could address several of these structural inefficiencies by embedding credit attributes, ownership records and settlement logic directly onto a unified ledger.
Native Tokenization Versus Earlier Crypto Experiments
Kinexys is advocating what it calls a “native tokenization” model, in which carbon credits are issued directly onto blockchain infrastructure as the primary system of record.
The approach differs from earlier tokenization efforts during the 2021 crypto boom, when third-party intermediaries converted existing carbon credits into tradable crypto-assets by locking credits off-chain and issuing separate digital tokens.
Those earlier experiments triggered industry backlash after concerns emerged that low-quality or retired credits could be repackaged into speculative digital products, raising risks of double-counting and market distortion. The controversy eventually prompted major registry operator Verra to halt certain tokenization activities.
Kinexys argues that native tokenization could reduce those risks by eliminating the need to reconcile separate on-chain and off-chain ledgers.
The report outlines several potential benefits of the model, including:
1. technically enforced data standardization,
2. real-time auditability,
3. atomic delivery-versus-payment settlement,
4. transparent pricing records,
5. interoperability across registries,
6. mitigation of double-counting risks,
7. integration with digital MRV systems,
8. collateralized carbon financing, and
9. creation of diversified composite carbon assets.
Supporters of the approach say these capabilities could eventually help carbon credits evolve into a more liquid and institutionally tradable asset class.
Regulatory Demand Could Become the Real Catalyst
The timing may prove significant as international compliance frameworks begin converging with voluntary carbon markets.
Beginning in 2027, the second phase of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is expected to impose mandatory offsetting requirements on participating airlines.
At the same time, Articles 6.2 and 6.4 of the Paris Agreement are gradually moving toward operational implementation, potentially allowing certain voluntary carbon credits to be used within national compliance systems and cross-border emissions accounting frameworks.
Many market participants believe the emerging UN-backed mechanisms could establish a clearer global “quality floor” for carbon credits, helping reduce uncertainty around what qualifies as a high-integrity offset.
“The carbon quality challenge can’t be solved if it’s kept subjective,” Natalia Dorfman, CEO and Co-Founder of Kita, said in the report.
Still, significant uncertainty remains around how consistently Article 6 rules will be implemented across jurisdictions and whether governments will fully align on verification standards, interoperability and enforcement mechanisms.
Infrastructure Alone May Not Restore Demand
While JPMorgan argues that improved infrastructure could help strengthen market integrity, some observers caution that technology alone may not revive voluntary carbon demand.
Corporate buyers have become increasingly cautious following several high-profile controversies involving the environmental credibility of certain offset projects between 2021 and 2023.
The report itself notes the rise of “green hushing,” in which companies continue purchasing credits while avoiding public disclosure of offset activity to reduce reputational exposure.
Critics argue that even with better settlement systems and transparency tools, voluntary markets may struggle to recover unless buyers regain confidence that carbon credits represent measurable and durable emissions reductions.
For JPMorgan, however, the effort also reflects a broader strategic push into tokenized financial infrastructure. Kinexys has processed more than $2 trillion in transaction volume across multiple digital asset applications since its launch, according to the report.
If carbon markets ultimately converge with regulated compliance systems, large financial institutions could play a much larger role in settlement, financing, collateral management and structured carbon products.
Whether that transformation materializes may depend less on blockchain technology itself than on whether governments, registries and corporate buyers can rebuild trust in the market’s underlying environmental integrity.
Source: This article is based on the industry whitepaper "Carbon Markets Reimagined: Scale, Resiliency, and Transparency through Digital Assets" published by Kinexys by J.P. Morgan (2025).
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