Regulatory and Legal Frameworks Flashcards
7 cards from real CCE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Regulatory and Legal Frameworks flashcards as text
FATF stands for which international organization that sets AML standards for crypto?
Answer: Financial Action Task Force
FATF (Financial Action Task Force) is the intergovernmental body that sets international standards for combating money laundering and terrorist financing, including for virtual assets.
What does 'KYC' require cryptocurrency exchanges to verify?
Answer: The identity of customers before providing services
KYC (Know Your Customer) requires exchanges to verify customer identity through documents like government IDs to prevent fraud and money laundering.
Under US tax law, how does the IRS classify Bitcoin and other cryptocurrencies?
Answer: As property
The IRS treats cryptocurrency as property for federal tax purposes, meaning capital gains rules apply to crypto transactions.
Which scenario would most likely trigger a Suspicious Activity Report (SAR) filing obligation for a US crypto exchange?
Answer: A customer conducting multiple transactions just below $10,000 to avoid reporting
Structuring transactions to stay below reporting thresholds (called 'structuring' or 'smurfing') is a classic red flag requiring SAR filing.
What is the key distinction between a 'custodial' and 'non-custodial' crypto wallet from a regulatory perspective?
Answer: Custodial wallet providers hold private keys and face more regulatory obligations
Custodial wallet providers hold customer private keys and are typically classified as money services businesses subject to KYC/AML regulations, while non-custodial wallet providers generally face fewer direct obligations.
Which of the following best describes a 'stablecoin' issuer's primary regulatory concern in the US?
Answer: Whether the stablecoin constitutes a money market fund or deposit-like instrument
US regulators have focused on whether stablecoins backed by fiat or assets resemble money market funds or bank deposits, triggering banking or securities regulation.
The concept of 'regulatory arbitrage' in cryptocurrency refers to:
Answer: Businesses relocating to jurisdictions with more favorable crypto regulations
Regulatory arbitrage occurs when crypto businesses choose to operate from jurisdictions with lighter-touch regulation to avoid stricter rules in other countries.