Environmental Implications of a Central Bank Digital Currency (CBDC)
Two-thirds of central banks in the East Asia and Pacific (EAP) region have started researching or testing the implementation of a Central Bank Digital Currency (CBDC). At the same time, the region accounts for one-third of world CO2 emissions and i...
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| Format: | Working Paper |
| Language: | English en_US |
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Washington, DC : World Bank
2022
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| Online Access: | http://documents.worldbank.org/curated/en/099400407132237243/IDU0a124ade308b10049bc0b76606ab6c8403920 http://hdl.handle.net/10986/37702 |
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okr-10986-377022022-07-14T05:11:07Z Environmental Implications of a Central Bank Digital Currency (CBDC) Lee, Soohyang Park, Jinhee CENTRAL BANK DIGITAL CURRENCY ENVIRONMENTAL IMPLICATIONS FINANCIAL STABILITY PAYMENT SYSTEMS LONG-TERM SUSTAINABILITY Two-thirds of central banks in the East Asia and Pacific (EAP) region have started researching or testing the implementation of a Central Bank Digital Currency (CBDC). At the same time, the region accounts for one-third of world CO2 emissions and is vulnerable to climate risks. As the Group of 7 (G7), European Central Bank (ECB), and Bank of England (BoE) have stated in their public statements, it is increasingly important to consider environmental impact when designing CBDC. However, only a few brief studies have been done on this subject, which will be crucial for the region. This Note explores the environmental implications of CBDC by comparing technical mechanisms and energy consumption within its distributed structure. It also illustrates differences in ecological footprint between CBDC and other payment methods (cryptocurrency, cash, and card networks). As the legitimacy of CBDC is backed by the trust of central banks, CBDC does not need to prove its legitimacy through its technological structure. Therefore, CBDC does not require the energy-intensive consensus or mining mechanisms used by a cryptocurrency, so its energy consumption is lower (comparable to that of a credit card system). CBDC can be designed to use various systems, such as Real Time Gross Settlement (RTGS), Distributed Ledger Technology (DLT), or a mixture of both. Careful deliberation to meet the objectives and implications will be important as CBDC can be a catalyst for financial innovation. 2022-07-13T21:01:24Z 2022-07-13T21:01:24Z 2022-07 Working Paper http://documents.worldbank.org/curated/en/099400407132237243/IDU0a124ade308b10049bc0b76606ab6c8403920 http://hdl.handle.net/10986/37702 English en_US World Bank Group Korea Office Innovation and Technology Note Series;No.8 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank Washington, DC : World Bank Publications & Research :: Working Paper Publications & Research East Asia and Pacific |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
CENTRAL BANK DIGITAL CURRENCY ENVIRONMENTAL IMPLICATIONS FINANCIAL STABILITY PAYMENT SYSTEMS LONG-TERM SUSTAINABILITY |
| spellingShingle |
CENTRAL BANK DIGITAL CURRENCY ENVIRONMENTAL IMPLICATIONS FINANCIAL STABILITY PAYMENT SYSTEMS LONG-TERM SUSTAINABILITY Lee, Soohyang Park, Jinhee Environmental Implications of a Central Bank Digital Currency (CBDC) |
| geographic_facet |
East Asia and Pacific |
| relation |
World Bank Group Korea Office Innovation and Technology Note Series;No.8 |
| description |
Two-thirds of central banks in the
East Asia and Pacific (EAP) region have started researching
or testing the implementation of a Central Bank Digital
Currency (CBDC). At the same time, the region accounts for
one-third of world CO2 emissions and is vulnerable to
climate risks. As the Group of 7 (G7), European Central Bank
(ECB), and Bank of England (BoE) have stated in their public
statements, it is increasingly important to consider
environmental impact when designing CBDC. However, only a
few brief studies have been done on this subject, which will
be crucial for the region. This Note explores the
environmental implications of CBDC by comparing technical
mechanisms and energy consumption within its distributed
structure. It also illustrates differences in ecological
footprint between CBDC and other payment methods
(cryptocurrency, cash, and card networks). As the legitimacy
of CBDC is backed by the trust of central banks, CBDC does
not need to prove its legitimacy through its technological
structure. Therefore, CBDC does not require the
energy-intensive consensus or mining mechanisms used by a
cryptocurrency, so its energy consumption is lower
(comparable to that of a credit card system). CBDC can be
designed to use various systems, such as Real Time Gross
Settlement (RTGS), Distributed Ledger Technology (DLT), or a
mixture of both. Careful deliberation to meet the objectives
and implications will be important as CBDC can be a catalyst
for financial innovation. |
| format |
Working Paper |
| author |
Lee, Soohyang Park, Jinhee |
| author_facet |
Lee, Soohyang Park, Jinhee |
| author_sort |
Lee, Soohyang |
| title |
Environmental Implications of a Central Bank Digital Currency (CBDC) |
| title_short |
Environmental Implications of a Central Bank Digital Currency (CBDC) |
| title_full |
Environmental Implications of a Central Bank Digital Currency (CBDC) |
| title_fullStr |
Environmental Implications of a Central Bank Digital Currency (CBDC) |
| title_full_unstemmed |
Environmental Implications of a Central Bank Digital Currency (CBDC) |
| title_sort |
environmental implications of a central bank digital currency (cbdc) |
| publisher |
Washington, DC : World Bank |
| publishDate |
2022 |
| url |
http://documents.worldbank.org/curated/en/099400407132237243/IDU0a124ade308b10049bc0b76606ab6c8403920 http://hdl.handle.net/10986/37702 |
| _version_ |
1764487702523150336 |