Professor Linda Jeng of the Georgetown Institute of International Economic Law was one of three witnesses who testified at the Feb. 14 Senate Banking Committee hearing on crypto, titled "Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets.” In her testimony, Jeng said that as federal lawmakers and regulators debate how to proceed with crypto regulation in the wake of the collapse of FTX, she wanted to highlight the value that blockchain technology can bring to other industries, such as the energy sector.
"Meanwhile, in the energy space, blockchain can be used to improve the transparency, accountability and traceability of greenhouse gas emissions," Jeng said in her testimony. "Governments and businesses can also use blockchain to better report, track and calculate in real-time the reduction of the carbon footprint across the entire value chain. For example, the World Bank Group’s International Finance Corp is exploring a blockchain solution with Chia Network that can enable transparent, instant sharing and reporting of information among governments and climate registry systems about climate projects. While the collapse has had devastating effects, we must also keep in mind that crypto is servicing some very real needs around the world. A nuanced and global outlook is key."
Jeng said it was important to contextualize the bankruptcy filing of crypto exchange FTX, calling it "a failure of people, not technology." She said one reason she remains optimistic "about the potential of areas like decentralized finance (DeFi) is because the system is, by design, meant to mitigate potential fallout from centralized, bad actors." She said the industry has "survived the contagion" from events like FTX's collapse specifically because of its decentralized nature, and that decentralization could be "revolutionary" if applied to other industries. Jeng said the International Finance Corp (IFC) of the World Bank Group has already taken steps toward exploring how blockchain could be used to support climate-friendly projects.
The IFC, which is an affiliate of the World Bank, said in August that in an effort to attract institutional investors to climate-friendly projects, it is supporting a blockchain-enabled platform that would be used for trading carbon offsets, Reuters reported. Carbon offsets are credits that can be purchased by companies and other organizations to support projects like planting trees or creating solar power, which serve as a way for that organization to offset its own emissions to work toward a carbon-neutral goal. The tokenization of carbon offsets has struggled to gain traction with institutional investors, mostly due to concerns about the origins of the tokens, but the IFC told Reuters that it would implement strict quality control measures and would only use tokens from an established registry.
The IFC announced in August that through a partnership with Cultivo, Aspiration and Chia Network, it was launching a Carbon Opportunities Fund to raise capital for the carbon credit program, according to a release. The project will use innovative technology to develop the carbon credit project.
"This new partnership will foster the standardization of carbon credits generated in emerging markets and help mitigate climate change," said Paulo de Bolle, senior global director, Financial Institutions Group, IFC. "Nature-based solutions can deliver up to 40% of the carbon removal required to combat the climate crisis. This new framework that will use new blockchain technologies is an innovative way for capital markets to fully engage in carbon credit trading in a transparent, secure, fair and beneficial manner."
Blockchain is transparent, decentralized and unchangeable, which is why more companies and even governments are turning to blockchain to record information and make secure payments, said TJ Jung, the CEO and co-founder of CloudBric. Jung wrote in a blog post published by IBM that the immutable nature of blockchain technology "eliminates trust required by traditional centralized authorities and inherently makes the system more secure. Any business can ensure that their information and their clients’ information will remain safely intact and out of the reach of hackers."
In 2018, the World Economic Forum, PwC and the Stanford Woods Institute for the Environment released a report arguing that "blockchain has significant potential to enable a move to cleaner and more resource-preserving decentralized solutions, unlock natural capital and empower communities. This is particularly important for the environment, where global commons and non-financial value challenges are currently so prevalent." The report highlighted the transparent and unchangeable nature of blockchain, which it said would benefit supply chain verification and product traceability. The report identified more than 65 environment-related use-cases for blockchain technology.
Jeng is a visiting scholar on financial technology at Georgetown University Law Center’s Institute for International Economic Law, as well as a senior lecturing fellow at Duke Law School. She also serves as general counsel and chief regulatory officer at the Crypto Council for Innovation.
