What happened to the on-chain carbon market after 2022

21 September 2026

The on-chain carbon market expanded rapidly through 2021 and early 2022, then stalled. Hype gave way to scrutiny, and several structural problems emerged that remain unresolved. Here is what happened and where the market sits now.

The 2021 - 2022 boom

Tokenised carbon credits first gained real traction in 2021. Toucan Protocol launched the first major bridge that let holders deposit Verra-registered credits into a pool and receive a corresponding token. Other platforms followed: KlimaDAO, Moss, and later Celo-based projects. The idea was straightforward: put a carbon credit on-chain, trade it like any other token, and retire it by burning the token.

By early 2022, the total value of tokenised carbon credits had reached hundreds of millions of dollars. Trading volumes surged. Retail buyers and even some institutions saw on-chain carbon as a way to participate in offsetting without dealing with registry accounts or brokers.

The Verra suspension and the credibility crisis

In May 2022, Verra - the largest carbon credit registry - announced it would investigate tokens that referenced its credits. Verra stated that tokenisation violated its registry terms because it created a new tradable instrument without Verra's oversight. Toucan and other protocols had not sought permission.

Verra did not shut down tokenisation entirely. Instead, it demanded that any tokenised credit must carry a clear label showing it came from a specific project batch. The intention was to prevent fungible pools that mixed credits from different vintages and project types - a practice that made it hard to verify what a token actually represented.

The immediate effect was a freeze. New issuances of Verra-linked tokens stopped. Existing pools could not accept new deposits. Trading volume dropped sharply.

The fragmentation that followed

After the Verra suspension, the on-chain carbon market split into several disconnected pieces:

1. Legacy pools continued trading existing tokens, but with no new supply, liquidity thinned.
2. New protocols emerged that worked with other registries, such as Gold Standard, or used self-issued credits outside any major registry.
3. Off-chain settlement models appeared, where a token represents a claim to a credit held in a registry account, not the credit itself. This avoided Verra's concerns but added a layer of trust.

None of these approaches achieved the liquidity or attention of the 2021 - 2022 peak.

What the market looks like now

As of late 2023 into 2024, the on-chain carbon market is smaller and quieter. Key characteristics:

• Total tokenised supply is flat or shrinking. New issuances are rare. Most volume comes from re-trading existing tokens, not new credits entering the system.
• Retirement volume is low relative to total supply. Many tokens sit in wallets or liquidity pools without being retired, meaning the corresponding credits remain unclaimed.
• Price discovery is poor. Token prices often diverge from the underlying credit's registry price. Spreads between bids and offers are wide.
• Verra remains the dominant off-chain registry. Its stance has not changed. Tokenisation under its terms is restricted, and no major protocol has negotiated a formal partnership.

The three unresolved problems

1. Registry alignment

No major registry has formally endorsed on-chain tokenisation. Verra's position is effectively a ban. Gold Standard allows tokenisation only under strict conditions that most protocols do not meet. Without registry cooperation, tokenised credits exist in a legal and operational grey zone.

2. Quality transparency

When credits from multiple projects are pooled into a single token, the buyer cannot easily know which project their token came from. Even with batch-level labels, the link between token and project is weaker than in the off-chain market. This makes it harder to assess whether a credit is from a high-quality forestry project or a low-quality industrial gas capture.

3. Retirement verification

Retiring a tokenised credit requires coordination between the blockchain and the registry. If the token is burned on-chain but the registry does not update its serial number status, the credit is effectively still available. Some protocols execute this step manually. Others rely on a third party to retire the off-chain credit. The process is not standardised, and errors or delays occur.

How to evaluate a current on-chain carbon token

If you are looking at a tokenised carbon credit today, check these points in order:

1. Which registry issued the underlying credit? Verra, Gold Standard, or a smaller registry? If it is Verra, confirm that the token was issued before the May 2022 suspension or under an explicit agreement.
2. Is the token backed by a specific project batch or a pool? Batch-backed tokens are easier to trace. Pool tokens obscure the project origin.
3. Who performs the off-chain retirement? Is it automated via a smart contract, or does a human or company need to send the serial number to the registry? If manual, what happens if that party fails?
4. Can you independently verify the retirement? The registry should show the serial number as retired. If you cannot check this yourself, the claim is weak.

The marketing gap

Many projects still promote on-chain carbon tokens as a revolution. They highlight speed, transparency, and accessibility. What they often omit is that the underlying market has not solved the basic trust problem: you rely on someone to tell you the token matches a real, retired credit. The blockchain provides a record of token transfers, but it cannot confirm what happens off-chain.

A tokenised carbon credit is no more credible than the process that connects it to a registry. That process remains fragmented, manual in parts, and unverified by the major registries. Until that changes, treat any grand claim about on-chain carbon with caution.

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