CBSA Tokenization & Digital Assets 1 — Questions and Answers
Question 1: Which ERC token standard is used for non-fungible tokens (NFTs) on Ethereum?
- ERC-20
- ERC-721 (Correct answer)
- ERC-1155
- ERC-777
Correct answer: ERC-721
ERC-721 defines a standard for non-fungible tokens where each token has a unique identifier and cannot be exchanged on a 1:1 basis with another token.
Question 2: What is the primary difference between a utility token and a security token?
- Utility tokens are always on Ethereum; security tokens are on private chains
- Utility tokens provide access to a product or service; security tokens represent an investment contract (Correct answer)
- Utility tokens are fungible; security tokens are non-fungible
- Utility tokens require KYC; security tokens do not
Correct answer: Utility tokens provide access to a product or service; security tokens represent an investment contract
Utility tokens grant holders access to a platform or service, while security tokens represent ownership or profit rights and are subject to securities regulations.
Question 3: Which token standard supports both fungible and non-fungible tokens in a single contract?
- ERC-20
- ERC-721
- ERC-1155 (Correct answer)
- ERC-223
Correct answer: ERC-1155
ERC-1155 is the multi-token standard that allows a single smart contract to manage multiple token types, including both fungible and non-fungible tokens.
Question 4: In the context of asset tokenization, what does fractional ownership mean?
- Owning a partial copy of a smart contract
- Dividing a real-world asset into multiple digital tokens so multiple parties can own a share (Correct answer)
- Splitting gas fees among token holders
- Holding tokens across multiple blockchain networks
Correct answer: Dividing a real-world asset into multiple digital tokens so multiple parties can own a share
Fractional ownership through tokenization allows high-value assets like real estate or art to be divided into tokens, enabling multiple investors to own a portion.
Question 5: What regulatory framework in the US classifies a digital asset as a security using the 'Howey Test'?
- CFTC Commodity Guidelines
- SEC Securities Act (Correct answer)
- FinCEN AML Rules
- OCC Crypto Guidance
Correct answer: SEC Securities Act
The SEC applies the Howey Test under the Securities Act to determine if a digital asset qualifies as an investment contract and thus a security.
Question 6: Which mechanism allows token holders to redeem tokens for an underlying asset in a tokenized asset system?
- Minting
- Burning (Correct answer)
- Staking
- Wrapping
Correct answer: Burning
Burning tokens removes them from circulation and typically triggers redemption of the underlying asset, maintaining the peg between token supply and real-world asset reserves.
CBSA Tokenization & Digital Assets 1
Which ERC token standard is used for non-fungible tokens (NFTs) on Ethereum?