IMF recommends eco-friendly CBDCs and non-PoW mechanisms for payments

A study by the International Monetary Fund (IMF), on energy consumption, revealed that crypto ecosystem design decisions are crucial to create an environmentally-friendly mainstream payment system.

The study “Digital Currencies and Energy Consumption” was conducted by the IMF to assess the best mechanism for creating central bank digital currencies (CBDCs).

Energy consumption per transaction (in kWh) for core processing of different payment systems. Source: IMF

The IMF shared the groundwork for policy discussion around the environmental impact of digital currencies. It recommended that we move away from Proof-of-work (PoW),-based distributed ledger applications (DLT) and added:

“Bitcoin (BTC), which is the most well-known of these types, consumes a lot of energy (approximately 144 terawatt hours (TWh) per year). Scalability solutions can reduce transaction costs, but they don’t reduce overall energy consumption.

The international organization recognized the higher energy efficiency of non-PoW, permised crypto assets, compared to traditional financial systems.

“The energy savings that non-PoW permitted crypto assets can make relative to the existing system of payment comes from both core processing architectures as well as user payment methods.

The study reveals that the IMF recommends to central banks to design CBDCs with an explicit goal to be environmentally-friendly. This includes selecting platforms, hardware, and design options that have a lower carbon footprint than legacy systems of the central banks, right from the experimental phase.

It was recommended that central banks include additional features in CBDCs. These included compliance, greater resilience, and offline capabilities.

IMF pointed out that policymakers will be considering mainstreaming crypto or CBDCs, while weighing the environmental impacts of the technology’s design. The study by IMF found that global payment systems consume 47.3 trillion watts of energy annually, roughly equal to the annual consumption of countries like Portugal or Bangladesh.

Related: The Iota Foundation and Dell team up to track the real-time carbon footprint

The Iota Foundation, an international nonprofit DLT ecosystem provider, joined forces with Dell Technologies to create a real-time carbon footprint tracking and monitoring system.

We have partnered with @Iota and @BioE to create real-time carbon footprint tracking using a #dataconfidence fabric! Watch how #ProjectAlvarium tracks carbon footprints using #DellTech Edge solutions.[email protected] #IOTA #Sustainability
— Dell Edge & Telecom (@Dell_Edge), June 6, 2022

This initiative will allow for near-real-time monitoring of carbon emissions from BioE’s sustainable energy facility and composting facility. Mathew Yarger is the head of sustainability at Iota Foundation.

“We are now able track and verify data about climate change and how it is being addressed at a level never before possible.”

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Eileen Wilson

Eileen Wilson –Technology and Energy My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.

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