The Dual Impact of Digital Currencies on Economy and Environment: Insights into the Role of Monetary Control

Abstract

Purpose: The rapid development and adoption of digital currencies have significantly transformed the global financial environment. This study, thus, aims to examine how digital currencies (CBDC, cryptocurrency mining, and staking) affect economic performance and contribute to the green economy, with monetary control acting as an intervening mechanism. Design/Methodology/Approach: The research employs a quantitative deductive methodology, collecting data through questionnaires from 438 respondents and utilizing structural equation modelling to empirically evaluate the proposed model. The survey was administered and distributed online, enabling broad access to participants across Pakistan.
Findings: The study finds that CBDC, cryptocurrency mining, and cryptocurrency staking significantly influence monetary control, which positively impacts both economic performance and the green economy. While these digital currencies directly boost economic performance, they do not directly impact the green economy. However, through monetary control, their indirect effects on both outcomes are positive and significant, indicating partial mediation for economic performance and full mediation for the green economy.
Originality/Value: The research contributes to the diffusion of innovation theory in two ways. It provides a thorough analysis of how digital currencies (CBDC, cryptocurrency mining, and cryptocurrency staking) affect economic performance and the green economy, a combination that has been underexplored in prior research. It also introduces the novel concept of monetary control as a mediator, examining its influence on the relationship between digital currencies and their economic and environmental outcomes, an area not previously studied. Recommendation: Central banks should use monetary control to develop policies that optimize the economic benefits of digital currencies like CBDCs while aligning them with environmental objectives. This includes promoting CBDCs for renewable energy funding and enforcing strict environmental standards on cryptocurrency activities to balance economic growth with sustainability.