Explanation:
When unbacked crypto assets gain widespread adoption for domestic transactions, they can cause "cryptoization," effectively bypassing the domestic currency and eroding the central bank's ability to conduct effective monetary policy. Issuing a Central Bank Digital Currency (CBDC) directly addresses this by providing a safe, efficient, and technologically comparable digital payment alternative denominated in the sovereign currency, helping to maintain the relevance of central bank money and preserving monetary policy transmission.
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Q.57 A country’s central bank is concerned about the potential for unbacked crypto assets to undermine its monetary policy. They observe that a significant portion of domestic transactions are now conducted using a popular unbacked cryptocurrency. Which of the following regulatory responses would be MOST directly aimed at addressing the central bank's concern regarding monetary policy effectiveness?
A
Pegging the national currency to the most popular cryptocurrency.
B
Issuing a central bank digital currency (CBDC).
C
Limiting the size of crypto transactions through exchange platforms.
D
Imposing a cap on the total value of unbacked crypto transactions allowed per individual annually.
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