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

2. A digital currency can be distributed with a condition programmed into it such as a timeframe for spending it. 

Which of the statements given above are correct? 

(a) 1 only 

(b) 2 only 

(c) Both 1 and 2 

(d) Neither 1 nor 2 

Ans: c

Explanation:

A central bank digital currency (CBDC) represents a digital form of public currency issued by a central bank. This system allows individuals and businesses to access a digital currency facilitated by their country’s central bank for various transactions and savings.

In essence, a CBDC is a digital representation of traditional coins and banknotes, manifested as digital tokens. These tokens are essentially electronic files that hold a specific value, linked to an identifiable owner. The transfer of value occurs seamlessly by altering the ownership reference, which facilitates payment.

A distinguishing feature of CBDCs compared to other electronic payment forms is their legal tender status. This means that individuals participating in transactions involving CBDCs have a direct claim to the central bank that issues the currency, reinforcing its legitimacy and acceptance.

Additionally, CBDCs can incorporate programmability, meaning they can come with predefined rules that govern how the money can be used. This feature allows a government to implement measures such as positive or negative interest rates to encourage or discourage spending on particular goods, restrict usage to specific categories of services, or even establish expiration dates for certain transactions.

Hence, both statements 1 & 2 are correct.

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