Module: | MODULE A: INTERNATIONAL BANKING
Q255: Consider the following statements regarding the deployment of Multi Central Bank Digital Currency platforms in international trade settlement:
Statement 1: A Multi Central Bank Digital Currency platform structurally connects multiple independent central banks onto a single shared technological ledger, enabling commercial banks from different countries to transact directly with one another in digital fiat currencies.
Statement 2: By facilitating direct peer to peer settlement in central bank money, these platforms eliminate the reliance on the traditional network of intermediary correspondent banks, thereby significantly reducing transaction latency and settlement risk.
Statement 3: Because Central Bank Digital Currencies are digital tokens, they are structurally identical to decentralized cryptocurrencies like Bitcoin and are governed by a decentralized network of anonymous public miners rather than sovereign monetary authorities.
Which of the statements given above is or are correct?
Statement 2: By facilitating direct peer to peer settlement in central bank money, these platforms eliminate the reliance on the traditional network of intermediary correspondent banks, thereby significantly reducing transaction latency and settlement risk.
Statement 3: Because Central Bank Digital Currencies are digital tokens, they are structurally identical to decentralized cryptocurrencies like Bitcoin and are governed by a decentralized network of anonymous public miners rather than sovereign monetary authorities.
Which of the statements given above is or are correct?
✅ Correct Answer: A
The correct combination is A. The future of international banking involves central bank issued digital money. . Structurally, a Central Bank Digital Currency is a direct digital liability of a sovereign central bank, pegged exactly one to one with the national government issued fiat currency.
Historically, cross border payments required a chain of commercial correspondent banks, each taking a fee and adding time delays.
To causally resolve this inefficiency, collaborative platforms known as Multi Central Bank Digital Currency networks, such as the mBridge project, place multiple central banks on a single shared ledger.
This allows a commercial bank in one country to pay a commercial bank in another country directly and instantaneously, making Statements 1 and 2 correct.
The use of central bank money entirely eliminates settlement risk, which is the risk that a counterparty defaults before the transaction clears.
Statement 3 is fundamentally incorrect.
Central Bank Digital Currencies are the exact opposite of decentralized cryptocurrencies.
They are centrally issued, centrally governed, and strictly controlled by the sovereign monetary authority of the issuing nation.
They do not rely on anonymous public miners; they rely on permissioned, verified computer nodes controlled by the state and regulated commercial entities.
Historically, cross border payments required a chain of commercial correspondent banks, each taking a fee and adding time delays.
To causally resolve this inefficiency, collaborative platforms known as Multi Central Bank Digital Currency networks, such as the mBridge project, place multiple central banks on a single shared ledger.
This allows a commercial bank in one country to pay a commercial bank in another country directly and instantaneously, making Statements 1 and 2 correct.
The use of central bank money entirely eliminates settlement risk, which is the risk that a counterparty defaults before the transaction clears.
Statement 3 is fundamentally incorrect.
Central Bank Digital Currencies are the exact opposite of decentralized cryptocurrencies.
They are centrally issued, centrally governed, and strictly controlled by the sovereign monetary authority of the issuing nation.
They do not rely on anonymous public miners; they rely on permissioned, verified computer nodes controlled by the state and regulated commercial entities.