12 Days of Christmas GMAT Competition 2025 - Day 6: Central bank digit

Going through the passage line by line:

S1: Evidence: CBDCs make financial systems strong by depending on banks less.
S2: Argument in favour of CBDCs because people will stop using banks, therefore banks cause less crises.
S3: Conclusion: CBDCs = less bank use = more financial stability.

We're looking to weaken this argument. Let's put the answer choices under a pressure test and see what happens.

Option A: Customers being happy doesn't have anything to do with more financial stability. Eliminate.
Option B: Even if central banks restrict the amount of accounts, it doesn't disprove that there will be more financial stability because of CBDC use. Eliminate.
Option C: Government trust, thus increased use doesn't really do anything to the argument of "CBDCs = less bank use = more financial stability". Eliminate.
Option D: More insurance from banks doesn't address the conclusion. Eliminate.
Option E: This breaks the argument by saying that people still continue to use banks for savings, even when CBDCs are instituted. In S2 we see that the argument is relying on the assumption that people will stop using banks.

Therefore E is our answer.

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CBC - strengthen financial system by reducing dependence on private banks.

CBDCs being Risk-free place => may hold funds directly(shift deposits from commercial banks) => reduce bank runs during crises => better stability.

Weaken the argument?

(A), (D) Irrelevant
(C), (E) Does not weaken the argument's reasoning.

(B) Correct. Directly weakens the reasoning. If limits are restricted, then the reasoning of lowering risk of bank runs break and hence the argument of overall financial stability.

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Bunuel

A. This is a strengthner as the option provides the benefits of CDBC. Eliminate A.

B. Even if the central banks limits the accounts, users will be able to move the accounts. This is option deosn't do anything much. Eliminat B.

C. Similar to A. This option strengthnes the argument.

D. We don't know the effect. Hence, the option is irrelevant to the conclusion.

E. Correct: Weakens the argument. If people hold multiple bank accounts, during economic crisis, the montey will be impacted. Hence, it weakens the plan.

Option E

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P1-CBDC's introduction--reason and target
P2-how these work--changes expected --their impact
C- widespread adoption --increase overall financial stability
weakening?
1. neither supports nor weakens as discuses of certain features of CBDC's that are liked by majority of pilot users--out
2. use of the word may limits in weakening of the conclusion.--out
3. though it talks about certain regions only but for them it supports the conclusion.--out
4. discusses about the what private banks have started but doesn't means that it will adversely affect the CBDC's---out
though only E is left out and is the correct answer but lets see, it states about use of same in other countries but that has not reduced people's dependency on private banks so stability is still at risk.

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Conclusion: widespread adoption of CBDCs would ENHANCE overall FINANCIAL STABILITY

Evidence:
- Individuals will shift deposits away from Commercial Banks. why?
- since CBDCs offer a risk-free place to hold funds
- so, lower risk of bank runs during economic crisis

Assumption:
Customers prefer a risk-free place to hold funds

To attack the conclusion, we need to find argument who shows customers not prefer a risk-free place to hold funds

Hence, the relevant answer is E. citizens continue to hold their saving in private banks (=> not a risk free place to hold funds)

Why are others incorrect
A. strengthen
B. Not relevant, restricting the CBDC account is a new different idea generated
C. strengthen
D. irrelevant to the conclusion, what private banks do with deposit insurance are not related to CBDC risk-free, since CBDC can still offer risk-free, whatever the banks provide

Bunuel

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answer E

citizens did not move money out of private banks so there would be no change ans still risk of run on banks

Bunuel

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Bunuel

Premises:
Central bank digital currencies (CBDCs) are being introduced as a way to strengthen financial systems by reducing dependence on private banks.
Proponents argue that since CBDCs offer a risk-free place to hold funds directly with the government, individuals will shift deposits away from commercial banks, lowering the risk of bank runs during economic crises.

Conclusion:
Therefore, widespread adoption of CBDCs would enhance overall financial stability.

Weaken question:

A. The majority of CBDC pilot users report satisfaction with transaction speed and digital convenience features.
User satisfaction doesn't really weaken the conclusion, if anything it may strengthen. Eliminate.
B. Central banks may restrict CBDC account limits to avoid destabilizing commercial lending markets.
If central banks restrict CBDC, then widespread adoption may not happen enough from private to public banks, thus may not lower bank run risk. and maynot enhance overall financial stability. Keep.
C. Surveys show that in regions with high trust in government institutions, public interest in CBDC adoption has been stronger.
This also doesn't weaken, if anything goes in the other direction. Eliminate.
D. Private banks have begun offering real-time payment systems and deposit insurance enhancements to retain their customer base.
Doesn't really weaken, even if private banks have offered these things, widespread adoption of CBDC might still enhance stability, Eliminate.
E. In countries where CBDC pilots have been launched, many citizens have opted to use them for payments but continue to hold their savings in private banks.
Doesn't really weaken, even if citizens have used them for payments, widespread adoption might still enhance financial stability. Eliminate.

Correct Answer: B

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Central bank digital currencies (CBDCs) are being introduced as a way to strengthen financial systems by reducing dependence on private banks. Proponents argue that since CBDCs offer a risk-free place to hold funds directly with the government, individuals will shift deposits away from commercial banks, lowering the risk of bank runs during economic crises. Therefore, widespread adoption of CBDCs would enhance overall financial stability.

Which of the following, if true, most seriously undermines the reasoning in the argument above?

A. The majority of CBDC pilot users report satisfaction with transaction speed and digital convenience features. INCORRECT
B. Central banks may restrict CBDC account limits to avoid destabilizing commercial lending markets. INCORRECT
C. Surveys show that in regions with high trust in government institutions, public interest in CBDC adoption has been stronger. INCORRECT
D. Private banks have begun offering real-time payment systems and deposit insurance enhancements to retain their customer base. INCORRECT
E. In countries where CBDC pilots have been launched, many citizens have opted to use them for payments but continue to hold their savings in private banks. CORRECT.
This statement make believe that something restricts citizen from taking full confidence in CBDC.

Ans E

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Bunuel

Conclusion : Financial stability will be increased by CBDC.
Reason: People will switch savings from private banks to CBDC.

A. Not touching reason or conclusion. Incorrect.
B. If central bank restricts the CBDC account limit, the plan wont work. But it may restrict, it may not. Not strong enough weakener. Incorrect.
C. Stronger Interest in CBDC will attract more savings there. Its strengthening the argument. Incorrect.
D. Private banks started giving real time payments & deposit insurance. This looks like it will give competition to CBDC. Correct.
E. Other country comparison might not work in this country. Incorrect.

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A. If users are happy, then it doesnt undermine the claim at all
B. Even with restrictions on number of accounts, the conclusion that widespread adoption of cbcds can still enhance financial stability
C. a fact about a type of region. It has no impact on conclusion.
D. Private banks may try to defend the position but argument is "if widespread adoption happends"
E. Correct. If this option is true, even with widespread adoption of cbds, the savings accounts are still with private banks thus it may not enhance the financial statbiilty that the author thought of

ans: option E

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The main conclusion of the argument is Widespread adoption of CBDCs would enhance overall financial stability. Reasoning provided by proponents is that CBDCs offer a risk free place to hold funds directly with the government and individuals will shift deposits (not necessary all but it can be portion also) from private banks , leading to financial stability. Assumption is here that large number of CBDCs accounts will be created leading to widespread adoption. We need to weaken the argument. Let's check the options:

(A) It is incorrect and is not attacking any premise or assumptions.
(B) This one is correct. It is attacking our assumption by stating that Central banks may restrict CBDCs account , which is now creating a doubt in boardroom whether widespread adoption is possible.
(C) Incorrect , since not attacking premise/assumption.
(D) Incorrect not attacking any premise/assumption. Retained customer base can still shift funds.
(E) Incorrect , since not attacking any premise/assumption.

So , B is the correct answer

Bunuel

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Central bank digital currencies (CBDCs) are being introduced as a way to strengthen financial systems by reducing dependence on private banks. Proponents argue that since CBDCs offer a risk-free place to hold funds directly with the government, individuals will shift deposits away from commercial banks, lowering the risk of bank runs during economic crises. Therefore, widespread adoption of CBDCs would enhance overall financial stability.

Which of the following, if true, most seriously undermines the reasoning in the argument above?

Conclusion - CBCDs adoption will enhance financial stability.
Conclusion supported by - risk free, less bank runs, deposit shifts from Comm. bank.

A. The majority of CBDC pilot users report satisfaction with transaction speed and digital convenience features. - It supports the argument and strengthen the conclusion

B. Central banks may restrict CBDC account limits to avoid destabilizing commercial lending markets. - Maybe, if implemented it will weaken the conclusion.

C. Surveys show that in regions with high trust in government institutions, public interest in CBDC adoption has been stronger. - Again supporting the argument.

D. Private banks have begun offering real-time payment systems and deposit insurance enhancements to retain their customer base. - Maybe - will weaken the conclusion, but we are not sure whether the given offerings are attractive enough for the customers to not shift to CBDC.

E. In countries where CBDC pilots have been launched, many citizens have opted to use them for payments but continue to hold their savings in private banks. - Better than B & D. If the individuals do not shift their deposits, one of the given reasoning is directly negated. Hence, weaking the over all conclusion. Answer

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As long as the deposits in private banks is shifted to CBDCs, the risk of bank run during crisis will be lowered.
Therefore, widespread adoption of CBDCs will enhance overall financial stability.
Assumption - The public will take the deposits from the private bank and put them in CBDC.

Bunuel

Now, we have to weaken the conclusion that " Even after widespread adoption of CBDCs, the overall financial stability is not ensured."
A - Doesn't directly affect the topic but it's a strengthener
B - A valid Strengthener
C - region with high trust have stronger public adoption, then the region with low trust will have less stronger public adoption. At the end of the day, adoption will take place. So it is a strengthener.
D - Okay so Private banks have began new offerings to retain the customer. But, we have no idea whether these offerings are better or not better than CBDCs. Therefore, this choice is neutral.
E - As per our pre-thinking, something that tells us, even after adopting CBDCs, the economy is not ensured of financial stability.

Hope it helps,
Thanks

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A. The focus is not on user satisfaction. The question is whether CBDCs would enhance overall financial stability.
B. This looks reasonable. Let's keep it for now.
C. This talks about the adoption of CBDCs. But we want to weaken if CBDCs adoption enhances overall financial stability.
D. Sure, but customers could still shift, strengthening the argument, or they will stay at private banks, weakening the argument. So we are not sure.
E. Now, if this is true, then it would weaken by showing a situation where even though CBDCs are adopted, they wouldn't enhance financial stability.

Out of B and E, E looks stronger as it gives a situation that actually happened, where B talks about a possible scenario.
Option E.

Bunuel

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A. This choice has nothing to do with ensuring financial stability it talks about satisfaction
B. While this could be true we do not know for sure-May
c. Again while this could be true but we do not know about the nation of our interest
D. This could undermine the shift but we so not know if the consumers will respond affirmatively
E. Correct. This is a real concern although we do not know if the same will happen in our country of interest. Again it directly affects the goal of stability by preventing bank runs

Bunuel

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23 Dec 2025, 02:19

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E

A --> articulation is not realted to speed and digital convinience.
B--> if central bank restricts that this weakening as it will can not onboard multiple customers, hence no sense in satbilizing the economy.
C--> Not related to risk factor which arguments said could be the attraction point.
D--> Again benefits is not the point, its about security.
[b]E --> people are favouring the scheme CBDC but keeping account in pvt banks as well.
This way the no will increase in CBDC but goal will not be achieved. [/b]

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Argument of the Proposers of CBDC: We give the possibility of holding money Risk free place with the government => People will shift their bank deposits away from the banks

So among the choices, the one which if true really undermines the argument above is something which breaks =/> the implication of the argument, hence option E.

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The correct answer is Statement E, since it weakens the argument

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Bunuel

Stimulus :

Premise : - CBDCs are introduced to strengthen financial system and individuals will shift deposits from private banks to central bank

Conclusion : - This will enhance financial stability

Pre thinking : - We need an option which shows that "shift " which they are assuming will happen may not occur

Let's check options : -

Option A : - it talks about satisfaction levels, not related to our interest --- Incorrect

Option B : - ok it shows that adoption might be limited, but doesn't directly weaken the argument --- Weak weakener --- Hold

Option C : - it is strengthener not weakener ---- Incorrect

Option D : - This is irrelevant because it just shows that private bank will try to retain the customer base but this doesn't prove anything --- Incorrect

Option E : - Yes, this matches with our pre-thinking, if savings don't shift then it will not enhance financial stability

Option E is our Answer

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Bunuel