Evolution and Role of Digital Currencies in Finance BFC Practice Questions (Page 6)

Questions 26–30

1. 26expert · hard

   A national government is considering issuing a CBDC. The central bank wants to maintain monetary policy control, while the finance ministry wants to promote financial inclusion. The public is concerned about privacy. Which design feature best balances these competing interests?

   • AA direct CBDC where the central bank holds all accounts, with full transaction transparency
   • BA two-tier CBDC where the central bank issues the currency and commercial banks handle customer-facing services, with tiered anonymity for small transactions
   • CA CBDC with no transaction limits and full anonymity
   • DA wholesale CBDC used only for interbank settlements
   Reveal Solution Discussion Select an answer first
2. 27foundation · easy

   Which of the following is a way traditional financial institutions are adapting to the rise of digital currencies?

   • AConverting all their assets into cryptocurrencies.
   • BIgnoring digital currencies and maintaining only traditional services.
   • COffering cryptocurrency custody and trading services to clients.
   • DBanning all digital currency transactions globally.
   Reveal Solution Discussion Select an answer first
4. 28application · medium

   A commercial bank is worried that a CBDC could lead to disintermediation, as customers might move deposits from the bank to the central bank. Which design feature would best mitigate this risk?

   • AMake the CBDC interest-bearing at a rate higher than bank deposits
   • BProhibit commercial banks from offering CBDC wallets
   • COffer CBDC accounts directly through the central bank with no limits
   • DSet a limit on the amount of CBDC an individual can hold
   Reveal Solution Discussion Select an answer first
5. 29foundation · easy

   Which of the following best describes the historical progression of digital currencies?

   • AFrom early digital cash protocols to decentralized cryptocurrencies, and now to central bank digital currencies.
   • BFrom central bank digital currencies to decentralized cryptocurrencies, and then to early digital cash protocols.
   • CFrom decentralized cryptocurrencies to early digital cash protocols, and then to central bank digital currencies.
   • DFrom physical cash to digital bank deposits, and then directly to central bank digital currencies without any intermediate steps.
   Reveal Solution Discussion Select an answer first
6. 30application · medium

   A traditional bank is evaluating the impact of digital currencies on its remittance business. The bank's current service charges high fees and takes 3–5 days to settle. Which strategic response best leverages the bank's strengths while addressing the competitive threat from digital currencies?

   • AAdvocate for stricter regulation of digital currencies to protect the bank's market share
   • BLaunch a proprietary stablecoin and integrate it with the bank's existing compliance systems
   • CPartner with a cryptocurrency exchange to offer Bitcoin remittances without internal changes
   • DIgnore digital currencies and focus on improving the existing wire transfer process
   Reveal Solution Discussion Select an answer first