Monetary Theories and Digital Assets Quiz

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What is the primary reason money is said to have arisen spontaneously?

To raise state revenues

To serve as a tangible commodity

To eliminate inefficiencies of barter (correct)

To create a standardized measure of value

According to metallist theory, what quality must money possess?

Intrinsic value and utility (correct)

High liquidity in all markets

Only government approval

Simplicity in design

What is a characteristic of metallic currencies in metallist theory?

They are exclusively paper-based

They must be electronic

They require frequent official appraisal

They have intrinsic value as commodities (correct)

What is a challenge when using commodity money?

Guaranteeing its quantity and quality Signup and view all the answers

What role does the state play according to chartalism theory?

It mandates accepted mediums for payments Signup and view all the answers

What does metallist theory primarily focus on?

The intrinsic value of money as a physical commodity Signup and view all the answers

Which statement best describes the minting process in relation to commodity money?

Minting functions as a guarantee of authenticity Signup and view all the answers

Why might the intrinsic value of money vary?

Tied to its non-monetary uses Signup and view all the answers

What characterizes cryptocurrencies?

They are decentralized and powered by blockchain. Signup and view all the answers

What is a distinguishing feature of NFTs?

They represent unique digital assets. Signup and view all the answers

According to Minsky, what is a key challenge in creating money?

Getting it accepted as payment is problematic. Signup and view all the answers

How does the Metallist Theory define the origin of money?

Money arose from barter based on valuable commodities. Signup and view all the answers

What does the Chartalist Theory propose about money?

State-sanctioned means of payment determine money's value. Signup and view all the answers

What is a characteristic shared by cryptocurrencies in the Metallist vs. Chartalist debate?

Cryptocurrencies possess features of both intrinsic worth and community validation. Signup and view all the answers

What issue is addressed by the concept of ‘double coincidence of wants’ in Metallist theory?

Both parties in a barter must have what the other desires. Signup and view all the answers

In the context of money theories, what role does acceptance play according to Minsky?

Acceptance is the main barrier to creating money. Signup and view all the answers

What is the main purpose of an Initial Coin Offering (ICO)?

Fundraising for blockchain projects Signup and view all the answers

Which statement accurately describes utility tokens in the context of ICOs?

They provide holders exclusive access to future services/products. Signup and view all the answers

Based on EY's analysis of 141 ICOs in 2017, what percentage was below listing price as of September 2018?

86% Signup and view all the answers

What is a characteristic of Bitcoin?

Proof-of-work system Signup and view all the answers

What do stablecoins seek to achieve?

Pegging to stable assets Signup and view all the answers

Which of the following examples represents a Central Bank Digital Currency (CBDC)?

China's Digital Yuan Signup and view all the answers

What can be expected as a consequence of Bitcoin's fixed supply if market growth occurs?

Significant deflation Signup and view all the answers

In terms of risk, what is a common issue associated with ICOs?

Potential for complete loss of value Signup and view all the answers

What is the primary backing mechanism for fiat-backed stablecoins?

They are backed 1:1 by fiat currency held in reserve. Signup and view all the answers

What happens if the value of the crypto collateral for a crypto-backed stablecoin drops?

More collateral is required or the stablecoin can be liquidated. Signup and view all the answers

Which of the following is a key risk associated with algorithmic stablecoins?

The algorithm may fail to maintain the peg. Signup and view all the answers

Which stablecoin is known for being backed by Ethereum and using smart contracts for stability?

DAI Signup and view all the answers

How do algorithmic stablecoins respond when their price rises above the pegged value?

They mint new coins to increase supply. Signup and view all the answers

What is a significant concern regarding the transparency of Tether (USDT)?

Transparency issues about its reserves have caused concern. Signup and view all the answers

What characterizes the backing of algorithmic stablecoins compared to fiat and crypto-backed stablecoins?

They adjust supply based on market conditions. Signup and view all the answers

Why are crypto-backed stablecoins often over-collateralized?

To account for the volatility of the collateral asset. Signup and view all the answers

What fundamental change did Tether make in its backing on 14 March 2019?

Incorporated loans to affiliate companies as part of its backing Signup and view all the answers

What differentiates Central Bank Digital Currencies (CBDCs) from traditional cryptocurrencies?

CBDCs are fully regulated and backed by the government. Signup and view all the answers

What is a known advantage of wholesale CBDCs?

Provide instant settlement and reduce risk in the financial system Signup and view all the answers

Which of the following statements about CBDCs is false?

CBDCs are primarily based on consumer usage data. Signup and view all the answers

What is the primary function of retail CBDCs?

Be used by individuals for daily transactions Signup and view all the answers

What was the alleged misuse involving Tether and the Bitfinex exchange?

Using Tether's funds to cover up missing funds amounting to $850 million Signup and view all the answers

Which of the following describes the primary benefit of the Bank of Canada’s Jasper Project?

It reduces settlement times and enhances security for financial transactions Signup and view all the answers

What is a key characteristic of CBDCs compared to traditional payment platforms like PayPal and Alipay?

CBDCs do not collect user data for marketing purposes Signup and view all the answers