> For the complete documentation index, see [llms.txt](https://forforest.gitbook.io/for/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://forforest.gitbook.io/for/for-en/context/2.2-the-current-state-and-challenges-of-refi-regenerative-finance.md). # 2.2 The current state and challenges of ReFi (Regenerative Finance) In order to overcome the limitations of legal tender and the global financial system, diverse alternative currency practices have been carried out around the world. Many of these took the form of currency systems independently issued by local governments, NPOs, or shopping districts, with the primary aim of promoting the development of specific local economies and strengthening community cohesion. In recent years, as Lana Swartz has also noted, the spread of electronic payments via cards and smartphones, together with the rise of blockchain and Web3 technologies, has accelerated the digitization of local currencies. Digitization has improved transaction transparency, reduced administrative costs, and dramatically increased payment speed, thereby supporting alternative currency practices. Among these, an important precedent referenced by FoR is the movement known as “Regenerative Finance” (hereafter ReFi), which applies blockchain technology to climate action and the resolution of social issues. Many ReFi projects use blockchain-based financial mechanisms to digitally tokenize the value of nature and build sustainable economic spheres that enable anyone to invest in and support them easily across borders. They have drawn attention in recent years as next-generation financial infrastructure that creates a new incentive structure in which those who do good for the planet and society are also justly rewarded economically. Today, projects are being put into practical use that tokenize carbon credits (greenhouse gas emission rights) to lower barriers to exchange, as well as projects that directly distribute proceeds to farmers practicing regenerative agriculture. With the rise of ReFi, the exchange function for digitized carbon credits has improved, but several challenges have also come to light. First, many conventional projects focused on the abstract global unit of “carbon,” but it has been pointed out that a single indicator alone cannot fully capture the multifaceted value of ecosystem services, such as biodiversity richness or the forest’s functions in providing water-source conservation and preventing landslides for local communities. The second challenge is the “excessive financialization” and “inflow of speculative capital” that can arise from tokenizing natural capital. ReFi is a mechanism that gives economic incentives to environmental protection, but due to the intense price volatility characteristic of the cryptoasset market, it has a structure that makes it easy for speculative actors seeking short-term profit rather than genuine environmental stewardship to enter. As a result, it has been pointed out that sudden price swings in tokens can destabilize the financing of local conservation projects, or that the natural environments that should be protected may instead be treated as mere instruments of a money game. Third, ecosystems are profoundly local. The issues faced by the Amazon rainforest and Japan’s satoyama woodlands are different, as are the care they require. Many small acts of care—daily observation, noticing subtle changes, and the transmission of region-specific techniques—are difficult to quantify. ReFi, which adopts a “measure → reward” model, may, like globally circulating legal tender, homogenize the unique qualities of each locality that cannot be reduced to numbers. In light of Escobar’s ontology, it carries the risk of subordinating highly complex systems of interdependence to a single numerical metric. What is needed is support for tangible local activities, alongside an increase in funding. Whether these challenges can be overcome and sustainability ensured without ending as a mere speculative boom is regarded as a major test for ReFi going forward. *** **ReFi Examples** Regen Network * * A platform that leverages satellite data and measurement technologies to generate ecological credits such as soil carbon and biodiversity. It has put into practical use a mechanism that directly distributes profits and incentives to local farmers and communities engaged in soil regeneration and forest conservation. KlimaDAO * * A decentralized autonomous organization (DAO) that uses digital tokens backed by carbon credits to lead an on-chain liquidity market for climate assets and an ecosystem for the automatic flow of capital into regenerative projects. Grassroots Economics * * A grassroots project for developing local currencies that has been widely implemented in rural areas and informal settlements in Kenya. It circulates local currency on the blockchain, based not on the national legal tender but on “promises” within the community. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. 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