Development of green central bank digital currency: A novel theoretical perspective and policy implications for Vietnam

Abstract

Amid global climate change and digital transformation, green central bank digital currency (CBDC) emerges as a promising solution to promote sustainable growth, particularly in developing countries like Vietnam. Developing a green CBDC not only addresses the need for financial system innovation but also tackles environmental challenges, such as greenwashing and inefficient capital allocation for sustainable development. The study proposes an integrated green CBDC framework for Vietnam, developing a theoretical model based on three pillars: Green-oriented Central Banking, CBDC-Sustainable Development Goals (SDGs) Integration, and Green Digital Finance. Accordingly, the green transmission mechanism of this CBDC, operating through a three-tier tagging system, automated financial incentive mechanisms, and carbon market integration, is illuminated. Notable research contributions include an integrated theoretical framework, an analysis of the conditions for Green CBDC implementation in Vietnam, and a roadmap for 2025- 2030. Building on this, the research proposes a Green CBDC model for Vietnam featuring automated green finance mechanisms, which is expected to contribute to addressing existing challenges and enhance the efficiency of capital allocation for sustainable development.