CBCP CBCP Blockchain Governance and Regulation 2 — Questions and Answers
Question 1: What does KYC (Know Your Customer) compliance require blockchain businesses to collect?
- Only email addresses of users
- Verified identity information such as government-issued ID (Correct answer)
- Users' private keys
- Transaction hash histories only
Correct answer: Verified identity information such as government-issued ID
KYC compliance requires blockchain businesses to collect and verify users' identity information, such as government-issued ID and proof of address, to prevent fraud and illicit activity.
Question 2: Which US regulatory framework requires financial institutions, including some crypto businesses, to file Suspicious Activity Reports (SARs)?
- Sarbanes-Oxley Act
- Bank Secrecy Act (BSA) (Correct answer)
- Gramm-Leach-Bliley Act
- Dodd-Frank Act
Correct answer: Bank Secrecy Act (BSA)
The Bank Secrecy Act (BSA) requires financial institutions and qualifying crypto businesses to file SARs with FinCEN when suspicious transactions are detected.
Question 3: What is a 'regulatory sandbox' in the context of blockchain innovation?
- A testing environment for smart contract code
- A controlled environment where startups can test products with relaxed regulations (Correct answer)
- A secure vault for storing digital assets
- A government-approved blockchain network
Correct answer: A controlled environment where startups can test products with relaxed regulations
A regulatory sandbox allows blockchain startups to test innovative products and services under a controlled regulatory environment with temporary exemptions from certain rules.
Question 4: Under US FinCEN guidance, a business that transmits value using cryptocurrency is classified as a:
- Registered Investment Advisor
- Money Services Business (MSB) (Correct answer)
- Commodity Pool Operator
- Transfer Agent
Correct answer: Money Services Business (MSB)
FinCEN classifies cryptocurrency businesses that transmit value as Money Services Businesses (MSBs), requiring them to register and comply with AML/BSA rules.
Question 5: Which international body sets global AML and counter-terrorism financing (CTF) standards that many countries apply to crypto?
- World Bank
- IMF
- FATF (Financial Action Task Force) (Correct answer)
- BIS (Bank for International Settlements)
Correct answer: FATF (Financial Action Task Force)
The Financial Action Task Force (FATF) sets global AML and CTF standards, including the 'Travel Rule' that many countries have adopted for cryptocurrency service providers.
Question 6: What does the FATF 'Travel Rule' require of Virtual Asset Service Providers (VASPs)?
- To record the geographic location of miners
- To share sender and recipient information for transactions above a threshold (Correct answer)
- To report all transactions to Interpol
- To restrict cross-border crypto transfers
Correct answer: To share sender and recipient information for transactions above a threshold
The FATF Travel Rule requires VASPs to collect and transmit originator and beneficiary information for cryptocurrency transactions above a specified threshold (typically $1,000).
CBCP CBCP Blockchain Governance and Regulation 2
What does KYC (Know Your Customer) compliance require blockchain businesses to collect?