Question
UPSC Prelims 2023 Question:
With reference to Central Bank digital currencies
consider the following statements:
- It is possible to make payments in a digital currency without using US dollar or SWIFT system.
- A digital currency can be distributed with a condition programmed into it such as a time-frame for spending it.
Which of the statements given above is/are correct?
Answer (Detailed Solution Below)
Option 3: Both 1 and 2
Detailed Solution
Explanation:
- Central bank digital currencies (CBDCs) are a form of digital currency issued by a country's central bank. They are similar to cryptocurrencies, except that their value is fixed by the central bank and equivalent to the country's fiat currency.
- Countries will be able to directly exchange digital currencies in a bilateral way and without going through SWIFT or similar settlement systems. So, statement 1 is correct.
- A CBDC is programmable to the point that the currency can be made to expire, thus forcing consumers to use it up to a certain date. So, statement 2 is correct.
Therefore, option (3) is the correct answer.
Subject: Economics | Money and Banking
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