With reference to Central Bank digital currencies, consider the following statements:

Question

1. It is possible to make payments in a digital currency without using the US dollar or SWIFT system.

2. 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?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer 1

Answer: (c) Both 1 and 2.

Explanation:

Statement 1 states that it is possible to make payments in a digital currency without using the US dollar or SWIFT system. This statement is correct. Central Bank digital currencies (CBDCs) are designed to be independent digital currencies issued by central banks. They can be used for transactions without relying on existing international payment systems like the US dollar or the SWIFT system.

Statement 2 states that a digital currency can be distributed with a condition programmed into it, such as a time-frame for spending it. This statement is also correct. CBDCs can be designed with programmable features, allowing certain conditions to be attached to the digital currency. For example, a central bank may impose a time limit or expiry date for spending the digital currency to encourage its circulation and prevent hoarding.