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Why can Central Bank Digital Currency not solve the RBI's problem?

1. Since CBDC is an Indian currency, it won't be used to make international transactions.
2. RBI will keep a check on every GBDC transaction and this makes it repugnant.
3. Because CBDC is a fiat currency and cannot be used for transactions as cryptocurrency.
4. Because it cannot give as much high returns as cryptocurrency gives.

Correct answer: Because CBDC is a fiat currency and cannot be used for transactions as cryptocurrency.

Solution

CBDC is issued by the central bank and is therefore a fiat currency backed by the state. The passage argues that cryptocurrencies are decentralized and function differently, so a CBDC cannot replace or solve the issues created by crypto assets.

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