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On the Importance of Gold Standard’s Tokenization Readiness Phase

On the Importance of Gold Standard’s Tokenization Readiness Phase

March 7, 2023

Gold Standard, one of the world’s leading carbon credit certification bodies, recently selected Flowcarbon as one of five organizations participating in the readiness phase of a tokenization project. This phase aims to discuss and create a digital asset model that includes the tokenization of Gold Standard VERs, and Flowcarbon will play a key role in finalizing the guidelines that will inform tokenization.

Flowcarbon has long believed in the tremendous value of tokenizing carbon credits.  The voluntary carbon market, or VCM, has grown rapidly in recent years but still faces serious challenges, including a lack of transparency and limited market access for smaller organizations. 

Tokenization can aid the voluntary carbon market in a range of ways, including by increasing liquidity and accessibility. Buyers and sellers can more easily trade credits, which can help to increase demand for credits and reduce volatility in the market. Tokenization can also help to reduce transaction costs and provide faster settlement times. The use of blockchain technology also increases transparency and tracking: it allows for the creation of a permanent, immutable record of all transactions, thereby enhancing the VCM’s credibility, as it provides a clear record of the history of each carbon credit. It can also help to reduce the risk of fraud and ensure that carbon credits are properly accounted for.

We applaud Gold Standard for leading the way in embracing blockchain technology and recognizing the potential benefits of tokenization for the voluntary carbon market. The topic of blockchain in the VCM has been a hot-button issue since the first attempts to tokenize credits were made back in late 2021. Gold Standard, as illustrated by its public consultation on tokenization and its Working Group on Digital Assets for Climate Impact, has been a leader in facilitating discussions. With the announcement of the readiness phase for digital assets, Gold Standard is pushing the industry from debates over the applicability and benefits of blockchain to the details of implementation. 

The tokenization of carbon credits is in its earliest phase. Much remains to be determined about protocol and standardization across the industry. What is certain, however, is that blockchain can unlock tremendous value and opportunities that exist in the voluntary carbon market. This is a momentous first step marking the beginning of a new era in the voluntary carbon market, and bringing the world one step closer to a net zero future.

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