Circular economy and central bank digital currency

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: The emergence of central bank digital currency (CBDC) provides an opportunity for central banks to make an important contribution to the transition to a circular economy. This paper examines the role of a central bank digital currency in the circular economy. Central banks can contribute to the transition to a circular economy in two ways: first, by making central bank digital currency accessible to circular businesses and other players in the circular economy sector; and second, by looking into how the design features of CBDC can support circular economy goals. On the role of CBDC in the circular economy, I argue that a central bank digital currency offers a better payment option for circular economy financial transactions; central bank digital currency can lead to greater financial inclusion for ‘unbanked’ informal workers in the circular economy; CBDC can create a gateway that allows a central bank to offer financial assistance to distressed circular businesses; using a central bank digital currency can reduce illicit activities in the circular economy; a central bank digital currency can be used to provide stimulus funding to support circular businesses during crises; and, a central bank digital currency can offer low transaction cost for circular economy financial transactions. The paper also shows the link between CBDC and the circular economy. It also offers a critical perspective on the link between CBDC and the circular economy.

Keywords: circular economy; central bank digital currency; circular finance; linear economy; resources; sustainability; central bank; CBDC design; blockchain; sustainable development; payment system; innovation. (search for similar items in EconPapers)
JEL-codes: E42 Q2 Q54 Q56 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ban, nep-cba, nep-env, nep-fdg, nep-iue, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Circular Economy and Central Bank Digital Currency (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:113469

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