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Blockchain for Sustainable Finance, a convenient oxymoron


We all pretty much agree about what Sustainable Finance is. The whole concept refers to any form of financial services that integrate in their inner workings, environmental, social and governance standards (ESG). When properly applied it can accelerate sustainable investment flows and better interactions between the energy and financial systems towards low carbon transition and boosting 3D development (decarbonization, decentralization, digitalization).

Now, let me refer to the title of this opinion piece. Why would I name this so called “revolutionary new trend” an oxymoron? Do I imply that it could belong to the rhetoric of green washing, so much in vogue nowadays or am I only stating that finance - with regard to the disasters it has caused since the mid-80s and will cause in the coming months- can in no way be associated with the term “sustainable”?

Indeed.

Let’s contextualize!

I understand that many intelligent, honest and highly skilled people believe in it and greatly contribute to the development of Sustainable Finance. We are dealing here with a pure ideological quid-pro-quo. But first, let me put this controversy in context. I have been working in the blockchain ecosystem for half a decade and very recently in business and start-up off shouts adopting Distributed Ledger Technologies (DLTs). When I started studying DLTs, I was maybe too much of an idealist and I thought that this ground-breaking tech was all about incentivization and increase of institutions’ and users’ willingness and ability to contribute to a new model of society where freedom, decentralized peer-to-peer exchanges were the new mantras. I have since become disillusioned and have come to rename blockchain trends: CLTs (Instead of DLTs), that is: Centralized Ledger Technologies. Which, you will agree, are none other than fancy spreadsheets.

Sustainable what?

Now, back to Sustainable Finance, most projects that flourish in this sector are very rarely decentralized and when I speak to their creators and that I blame them -gently-, they answer me with a sly smile that without compliance with regulations, governments and authorities operating in each jurisdiction would not let them develop their projects. Fair enough. Thus, these projects of long-term sustainability looked down on public blockchains such as Bitcoin and Ethereum as they are perceived as non-reliable regarding regulation. My goal is not to argue unnecessarily about the sustainability of these projects. They are what they are and most of the time provide solutions to concrete problems. Well done!

Free world / Dystopian world?

What I want to emphasize here is that the appropriation of DLTs by the business world does not go through the adoption of public blockchains -or very little in proportion. True Decentralized Finance (DeFi), for instance, is still in its infancy. Most of the projects I came across in Sustainable Finance are dangerously centralized and they could potentially be the victims of economic interests motivated only by profit and the lure of gain. Thus, the case of sustainable financing is questioned for the simple fact that what seemed to be a revolution is instead “more of the same”, a maximization of capitalism always in search of new opportunities, more profits, disintermediation and lower production costs. To be fair, some projects openly want to help minorities and poor farmers in Less Developed Countries (LDCs). Thanks to these initiatives, these people see their standards of living increase substantially, but these projects are often located in politically unstable countries and as they are centralized, they can be more easily controlled or destroyed by authoritarian and corrupt regimes.

Once again, the ideological debate around public versus permissioned / private blockchains will not lead to any conclusion but I want to contribute to animate a debate rich in controversy because beyond profit lies our future which could be brighter or a pure dystopian nightmare as blockchain is truly a two edged sword.


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