True or False: Policy can still be applied to bypassed traffic depending on the deployment mode.

The nature of the question focuses on whether policy can be applied to traffic that has been bypassed, which can indeed depend on the deployment mode of the Blue Coat Proxy.

In certain deployment modes, like explicit proxying, traffic can be intercepted and policies can be applied. However, when traffic is bypassed, it typically means that the traffic is sent directly to its destination without going through the proxy, which generally restricts the ability to apply policies to that traffic.

In transparent configurations, while some level of policy application might be possible on bypassed traffic, it is not consistent across all scenarios. Thus, the assertion that "policy can still be applied to bypassed traffic" depends on various factors including how the proxy is deployed and configured. Given these complexities, the most straightforward perspective is that in typical situations where traffic is truly bypassed, policies cannot be enforced, leading to the understanding that the statement is false.