Blockchain Governance and Regulatory Compliance Flashcards

Which tax treatment does the IRS apply to cryptocurrency in the United States?

Answer: Cryptocurrency is treated as property, subject to capital gains tax

The IRS Notice 2014-21 established that cryptocurrency is property, meaning sales and exchanges trigger capital gains or losses.

What is 'quadratic voting' designed to address in blockchain governance?

Answer: The outsized influence of large token holders by making additional votes progressively costlier

Quadratic voting charges token holders exponentially more for each additional vote, giving smaller holders relatively more influence than in simple token-weighted voting.

What is the purpose of a 'multi-sig' requirement in DAO treasury governance?

Answer: To require multiple keyholders to approve large fund movements, reducing single-point-of-failure risk

Multi-sig wallets require M-of-N signers to approve transactions, preventing any single compromised key from draining the treasury.

Which FATF (Financial Action Task Force) guidance directly impacts how US crypto businesses handle cross-border transfers?

Answer: FATF Recommendation 16 (Travel Rule)

FATF Recommendation 16, known as the Travel Rule, requires VASPs to share originator and beneficiary information for crypto transfers above the threshold.

What is a 'constitutional DAO' governance approach?

Answer: A DAO with a written charter defining immutable rules, member rights, and governance processes

A constitutional DAO codifies its founding principles and governance rules in a document (often on-chain), providing stability and clarity for members.

Under US law, which legal entity structure is most commonly used to give a DAO legal recognition and limited liability?

Answer: Wyoming DAO LLC

Wyoming enacted DAO LLC legislation in 2021, allowing DAOs to register as LLCs with member protections while maintaining decentralized governance.