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Introduction of Central Bank Digital Currency (CBDC) has the potential to provide which of the following benefits?
- Reduced dependency on cash
- Higher seigniorage
- Reduced settlement risk
Select the correct answer code:
- a)1, 2
- b)1, 3
- c)2, 3
- d)1, 2, 3
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
Introduction of Central Bank Digital Currency (CBDC) has the potential...
Introduction of CBDC has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, reduced settlement risk. Introduction of CBDC would also possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option.
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Community Answer
Introduction of Central Bank Digital Currency (CBDC) has the potential...
The correct answer is option 'D' - 1, 2, 3.
Central Bank Digital Currency (CBDC) refers to a digital form of currency issued by the central bank of a country. It is a digital representation of a country's fiat currency, such as the US dollar or the Euro, that is backed by the central bank and can be used for electronic payments and transactions.
Below are the benefits of introducing CBDC:
1. Reduced dependency on cash:
- CBDC can reduce the dependence on physical cash as it provides a digital alternative for making payments and transactions.
- It offers convenience and efficiency in conducting financial transactions, eliminating the need for carrying cash or physically visiting a bank branch.
- This can be particularly useful in situations where cash availability is limited, such as during natural disasters or pandemics.
2. Higher seigniorage:
- Seigniorage refers to the profit or revenue generated by the central bank through the issuance of currency.
- With CBDC, the central bank can potentially increase its seigniorage revenue as it can directly issue and control the digital currency.
- This revenue can be used for various purposes, such as funding government expenditures or implementing monetary policy measures.
3. Reduced settlement risk:
- Settlement risk refers to the risk of non-payment or delayed payment in financial transactions.
- CBDC can help reduce settlement risk as it enables real-time and instant settlement of transactions, eliminating the need for intermediaries or clearinghouses.
- This can enhance the efficiency and security of financial transactions, reducing the risk of fraud and counterparty default.
In summary, the introduction of Central Bank Digital Currency (CBDC) can provide several benefits, including reduced dependency on cash, higher seigniorage revenue for the central bank, and reduced settlement risk in financial transactions. These benefits can contribute to a more efficient and secure financial system.
Central Bank Digital Currency (CBDC) refers to a digital form of currency issued by the central bank of a country. It is a digital representation of a country's fiat currency, such as the US dollar or the Euro, that is backed by the central bank and can be used for electronic payments and transactions.
Below are the benefits of introducing CBDC:
1. Reduced dependency on cash:
- CBDC can reduce the dependence on physical cash as it provides a digital alternative for making payments and transactions.
- It offers convenience and efficiency in conducting financial transactions, eliminating the need for carrying cash or physically visiting a bank branch.
- This can be particularly useful in situations where cash availability is limited, such as during natural disasters or pandemics.
2. Higher seigniorage:
- Seigniorage refers to the profit or revenue generated by the central bank through the issuance of currency.
- With CBDC, the central bank can potentially increase its seigniorage revenue as it can directly issue and control the digital currency.
- This revenue can be used for various purposes, such as funding government expenditures or implementing monetary policy measures.
3. Reduced settlement risk:
- Settlement risk refers to the risk of non-payment or delayed payment in financial transactions.
- CBDC can help reduce settlement risk as it enables real-time and instant settlement of transactions, eliminating the need for intermediaries or clearinghouses.
- This can enhance the efficiency and security of financial transactions, reducing the risk of fraud and counterparty default.
In summary, the introduction of Central Bank Digital Currency (CBDC) can provide several benefits, including reduced dependency on cash, higher seigniorage revenue for the central bank, and reduced settlement risk in financial transactions. These benefits can contribute to a more efficient and secure financial system.
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Introduction of Central Bank Digital Currency (CBDC) has the potential to provide which of the following benefits? Reduced dependency on cash Higher seigniorage Reduced settlement riskSelect the correct answer code:a)1, 2b)1, 3c)2, 3d)1, 2, 3Correct answer is option 'D'. Can you explain this answer?
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Introduction of Central Bank Digital Currency (CBDC) has the potential to provide which of the following benefits? Reduced dependency on cash Higher seigniorage Reduced settlement riskSelect the correct answer code:a)1, 2b)1, 3c)2, 3d)1, 2, 3Correct answer is option 'D'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Introduction of Central Bank Digital Currency (CBDC) has the potential to provide which of the following benefits? Reduced dependency on cash Higher seigniorage Reduced settlement riskSelect the correct answer code:a)1, 2b)1, 3c)2, 3d)1, 2, 3Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Introduction of Central Bank Digital Currency (CBDC) has the potential to provide which of the following benefits? Reduced dependency on cash Higher seigniorage Reduced settlement riskSelect the correct answer code:a)1, 2b)1, 3c)2, 3d)1, 2, 3Correct answer is option 'D'. Can you explain this answer?.
Introduction of Central Bank Digital Currency (CBDC) has the potential to provide which of the following benefits? Reduced dependency on cash Higher seigniorage Reduced settlement riskSelect the correct answer code:a)1, 2b)1, 3c)2, 3d)1, 2, 3Correct answer is option 'D'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Introduction of Central Bank Digital Currency (CBDC) has the potential to provide which of the following benefits? Reduced dependency on cash Higher seigniorage Reduced settlement riskSelect the correct answer code:a)1, 2b)1, 3c)2, 3d)1, 2, 3Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Introduction of Central Bank Digital Currency (CBDC) has the potential to provide which of the following benefits? Reduced dependency on cash Higher seigniorage Reduced settlement riskSelect the correct answer code:a)1, 2b)1, 3c)2, 3d)1, 2, 3Correct answer is option 'D'. Can you explain this answer?.
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