UPSC Prelims 2023 Question:

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?

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