UPSC Prelims 2023 · Question 92 of 97
UPSC Prelims 2023 question on CBDC Payments
- ExamUPSC CSE
- Year2023
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicBanking
- DifficultyMedium
- TypeStatement
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-fame for spending it.
Which of the statements given above is/are correct?
Show answer
Answer: C. Both 1 and 2
Verdict
Both statements are correct → Option (c) Both 1 and 2.
Statement by statement
Statement 1 – CORRECT: Alternatives to SWIFT and the U.S. dollar are coming from two directions: cryptocurrencies and central bank digital currencies. Countries will be able to directly exchange digital currencies in a bilateral way and without going through SWIFT or similar settlement systems. When the technology allows seamless and instantaneous convertibility from one sovereign currency into another, it changes the practical need for a dominant global reserve currency.
Statement 2 – CORRECT: CBDC could be employed for fiscal transfers to households or firms, such as relief or stimulus payments. The transfer payments could also be 'programmable', with conditions such as expiration upon a certain date or a requirement to spend the funds at certain vendors. This means digital currency can be distributed with conditions programmed into it, such as a time-frame for spending.