Ben Strack

Natural gas producer PureWest is minting tokenized emissions credits in an effort to reduce the footprint of a methanol producer and other customers.



The Denver-based company’s certified environmental tokens (CETs) reflect aggregated data collected and verified by data company Project Canary.&nbsp;



PureWest is now transacting the tokenized credits with Switzerland-based Proman, the world&#8217;s second largest methanol producer, the energy firm announced this week.&nbsp;PureWest itself is the most prolific natural gas producer in Wyoming, per its website.



The CETs are each matched to one million British thermal units (MMBtu) of gas produced and are sold on an MMBtu basis, Kelly Bott, PureWest’s senior vice president of ESG, land and regulatory told Blockworks.&nbsp;



Using blockchain eliminates concerns about double selling and proves that each MMBtu of gas was produced with the Project Canary-verified attributes. PureWest <a href="https://purewest.com/news/purewest-energy-and-proman-sign-agreement-to-reduce-scope-3-methanol-footprint-through-digital-tokens/" target="_blank" rel="noreferrer noopener">describes</a> CETs as &#8220;purchasable credits stored on the blockchain for third-party users to achieve their emission reduction goals.&#8221;



“With the purchase of these tokens, Proman can now purchase gas from anywhere while taking credit for our low-methane, freshwater friendly, safely and responsibly produced/certified gas when calculating their own environmental footprint,” Bott said.&nbsp;&nbsp;&nbsp;



“These types of transactions serve to incentivize other producers to reduce their own environmental footprint and jump into this rapidly developing market.”



The tokens are transacted and stored on EarnDLT’s private blockchain, which was built using enterprise blockchain platform Quorum.&nbsp;



JPMorgan forked Ethereum to create Quorum in 2016 before selling it to blockchain software firm ConsenSys four years later.



<h2 class="wp-block-heading">Tokenization is becoming en vogue</h2>



The PureWest-Proman linkup comes after Gold Standard chose climate tech company Flowcarbon to help it finalize guidelines around tokenizing voluntary emission reduction (VER) credits.&nbsp;



Gold Standard CEO Margaret Kim said in a statement last September — when the company began <a href="https://www.goldstandard.org/blog-item/gold-standard-announces-proposals-allow-creation-digital-tokens-carbon-credits" target="_blank" rel="noreferrer noopener">exploring</a> how it should go about creating digital tokens — that “blockchain could bring innovation, transparency and greater finance to the carbon market.”&nbsp;&nbsp;



<a href="https://blockworks.co/news/2023-year-of-asset-tokenization" target="_blank" rel="noreferrer noopener">Tokenization has picked up steam</a> in recent months, with Goldman Sachs, investment firm <a href="https://blockworks.co/news/private-markets-investment-firm-hamilton-lane-to-tokenize-3-funds" target="_blank" rel="noreferrer noopener">Hamilton Lane</a> and Hong Kong’s government among those who have revealed such initiatives.&nbsp;&nbsp;



BlackRock’s Larry Fink, CEO of the world’s largest asset managers, said in a letter earlier this month that the tokenization of assets is <a href="https://blockworks.co/news/blackrock-ceo-us-lagging-innovation-tokenization" target="_blank" rel="noreferrer noopener">an attractive use case</a> for his company. He had previously called the tokenization of securities <a href="https://blockworks.co/news/blackrock-ceo-still-in-crypto-for-the-tech-despite-ftx-scandal" target="_blank" rel="noreferrer noopener">“the next generation for markets.”</a>



Most recently, <a href="https://blockworks.co/news/tokenized-home-nets-thousands" target="_blank" rel="noreferrer noopener">Roofstock sold a Georgia home to ReaIT</a>, a provider of fractional real estate investment in tokenized assets, in a transaction facilitated by an Ethereum-based NFT.



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blockchain

Major Energy Companies Are Trading Tokenized Emissions Credits

David Canellis

<div id="highlights-block_628b9282eb317" class="highlights">
 <ul>
 <li>JPMorgan’s permissioned blockchain Onyx tokenizes US Treasurys for fast settlement within intraday repo markets</li>
 <li>BNP Paribas is the latest bank to join the network after rival Goldman Sachs began utilizing it last June</li>
 </ul>
 
</div>



French banking giant BNP Paribas, the second-largest banking group in Europe, is now trading digital tokens on JPMorgan’s blockchain network for short-term asset loans.



JPMorgan’s blockchain system, Onyx Digital Assets, launched in December 2020 and has so far processed more than $300 billion in government bond transactions, according to a <a href="https://www.ft.com/content/f23c990a-913d-4613-8014-f61d35b6e09d" target="_blank" rel="noreferrer noopener">report</a> from the Financial Times.



For now, Onyx deals specifically with the intraday repurchase (repo) market, which is valued at around $12 trillion. Banks can lend tokenized US Treasurys for a few days at a time without the assets leaving their balance sheets. This helps navigate liquidity demands imposed on institutions in the wake of the 2008 financial crisis.



Borrowers can then exchange the tokens for liquid cash, boosting their available collateral for use within derivatives markets. Onyx is integrated with JPMorgan’s own digital payments token, JPM Coin, which debuted around the same time as its blockchain platform.



Deals on the permissioned blockchain network are settled by automated smart contracts. Onyx’s <a href="https://www.jpmorgan.com/onyx/onyx-digital-assets.htm" target="_blank" rel="noreferrer noopener">website</a> boasts that the service enables “near instantaneous atomic exchange of collateral for cash.” Repo transactions can be “traded, settled, and matured within a day,” and trade terms can be as little as minutes.



BNP Paribas’ head of engineering Joe Bonnaud told the Financial Times the bank’s adoption of Onyx was more than exploration of a proof of concept. The bank, which managed $612 billion in assets at the start of the year, hopes the move will help utilize blockchain as trading and operations life cycles of markets evolve. Rival bank Goldman Sachs joined Onyx last June.



Permissioned (private) blockchains such as Onyx differ greatly from Bitcoin and Ethereum, which are permissionless (public) networks. Anyone with the right equipment can join and use permissionless blockchains — either as validators or regular users — while JPMorgan alone controls who validates Onyx transactions and ultimately decides which institutions can access its network.



BNP Paribas is among a consortium of French banks experimenting with a <a href="https://cms.blockworks.co/french-central-bank-trades-oats-on-private-blockchain/" target="_blank" rel="noreferrer noopener">permissioned blockchain project</a> of the French central bank, trading debt securities as part of research on central bank digital currencies (CBDCs).



<h3 class="wp-block-heading">JPMorgan is deep in blockchain, slowly wading into crypto</h3>



JPMorgan adopting blockchain — even a watered-down version of it — might be surprising to some, considering CEO Jamie Dimon’s repeated criticisms of bitcoin over the years.



Dimon has been one of the most vocal proponents of the “blockchain, not bitcoin” mantra, which became synonymous with crypto-weary institutional players in 2018 — labeling BTC “fool’s gold” and “worthless” as recently as October.



JPMorgan developed and sold open source enterprise blockchain platform Quorum to Ethereum giant ConsenSys in August 2020 for an undisclosed amount. Quorum enables companies and other entities to deploy their own blockchain networks validated by a single entity, hosted by Microsoft’s Azure cloud service. JPMorgan joined a $65 million ConsenSys funding round one year later.



Despite Dimon’s skepticism, JPMorgan quietly began offering its richest clients access to a half-dozen crypto funds last year, including a bitcoin fund operated by New York-headquartered finance unit NYDIG, four Grayscale Investment crypto funds, and one managed by Osprey.



JPMorgan also made a “strategic investment” in the San Francisco-based blockchain analytics firm TRM Labs in February. The company helps trace illicit crypto flows to aid in regulatory matters, similarly to Chainalysis and Elliptic.



The bank even established a &#8220;<a href="https://cms.blockworks.co/jpmorgan-enters-the-metaverse-with-virtual-decentraland-lounge/" target="_blank" rel="noreferrer noopener">lounge</a>&#8221; (also named Onyx) in the blockchain-powered metaverse app Decentraland in the same month, the first major institution to do so.



As for what’s next, head of Onyx Digital Assets Tyrone Lobban told reporters JPMorgan was exploring institutional access to decentralized finance markets via Onyx, although details were not forthcoming.



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