Daily Passage Test for CLAT - May 16 MCQs & solutions Free

The primary concern raised in the passage is the potential loss of monetary and fiscal authority for the sovereign government in the face of private currencies such as cryptocurrencies. The passage suggests that CBDCs, like the Indian version known as e₹-R, are seen as a necessary response to this threat. However, the passage also highlights that this is not a straightforward solution, and there are larger implications to consider. The government's dominance in the debate, driven by the interests of finance capitalists, may not fully address concerns such as government surveillance and the curtailment of individual freedom. Therefore, option A is the correct answer as it reflects the central concern of CBDCs potentially leading to a loss of monetary authority for the government.

The main contention emphasizes the potential risks and concerns associated with CBDCs in a capitalist economy, despite their initial appearance as a solution to the threat posed by private cryptocurrencies. The passage discusses the loss of monetary and fiscal authority, curtailment of individual freedom, surveillance, and abuse of data mining as some of the larger implications and dangers of digitalization. Only option C matches the above contention.

The passage expresses concerns about the use of digital currency in India, particularly related to the dangers of surveillance by the state and the potential for the abuse of data mining. It suggests that even in legitimate private exchanges of digital currency, there is a cause for concern regarding government surveillance and the curtailment of individual freedom. This aligns with option A, which correctly identifies the major concern expressed in the passage regarding the use of digital currency in India.

Sir Jon Cunliffe's statement illustrates that digital currency can be programmed to restrict its usage for specific purposes. In the context of the passage, this highlights the potential control and surveillance associated with Central Bank Digital Currencies. Therefore, the correct deduction is that it is possible to configure digital currency to impose limitations on its usage.

Correct Answer - Option C

As per the passage, one of the viable motives for introducing Central Bank Digital Currencies (CBDCs) is to counter the threat emanating from cryptocurrencies, which have the potential to undermine the fiscal authority held by sovereign governments. CBDCs are considered a strategic response aimed at preserving control and authority over the currency.

The passage does not suggest that the launch of CBDCs is a means of disregarding the broader implications of the overall political economy of digitalization. Instead, it acknowledges these broader implications and associated risks. While the monitoring and traceability of transactions may be attributes of CBDCs, the passage does not explicitly state that these are reasons for their introduction by the sovereign government. Additionally, the passage does not indicate that launching CBDCs is intended to promote the data mining ecosystem or provide data to support business growth. It raises concerns about data collection and the potential misuse of data linked to digital transactions.

Therefore, options A, B, and C can be eliminated as plausible reasons, and option D remains the correct answer.