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?
Answer & explanation
Answer: (c) Both 1 and 2
Both statements are correct. A central bank digital currency (CBDC) is the central bank's own money in digital form, so it can be moved directly between participants without a dollar leg or the SWIFT messaging network, and it can be programmed with rules such as an expiry date.
- ✓ 1. Multi-CBDC platforms such as the BIS-led Project mBridge let central banks and banks exchange their digital currencies peer to peer on a shared network, as an alternative to routing cross-border payments through correspondent banks and the dollar.
- ✓ 2. RBI's concept note on CBDC says money can be programmed by tying its end use, and that tokens may carry an expiry date by which they must be spent.
Remember · CBDC is sovereign money in digital form; it can settle cross-border payments directly between currencies and can be programmed, for example with an expiry date or a restricted use.
Sources
- BIS press release: Project mBridge pilot on a cross-border CBDC platform (26 Oct 2022) ↗ “By enabling peer-to-peer and instant exchange of multiple CBDCs on a single network, Project mBridge aims to solve long-standing inefficiencies in cross-border payments”
- RBI Concept Note on Central Bank Digital Currency (October 2022) ↗ “tokens may have an expiry date, by which they would need to be spent, thus ensuring consumption”
Question and answer: UPSC's official GS Paper I (2023, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·