[Solved] 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?

Q22. With reference to Central Bank digital currencies, consider the following statements:

1. It is possible to make payments in a digital currency without using 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?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Answer: 3

Statement 1: CBDCs have the potential to bypass intermediaries like SWIFT and the US dollar system, enabling more direct and efficient transactions. This statement is likely correct.

CBDCs could potentially reduce reliance on intermediaries in some cases.

Statement 2: Digital currencies can be programmed with rules and restrictions using smart contracts.

These controls can manage spending, activate/deactivate features, or even cause the currency to expire if not used within a timeframe. This statement is correct.

Widespread CBDC adoption could significantly impact the financial landscape. Payments could become faster, more efficient, and more secure. However, challenges like cybersecurity, financial stability, and the effectiveness of monetary policy need to be addressed.