Practice Test Geeks(CCE) Certified Cryptocurrency Expert Practice Test
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Regulatory and Legal Frameworks Flashcards

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  1. What is 'CFT' in the context of cryptocurrency regulation?

    Answer: Countering the Financing of Terrorism

    CFT (Countering the Financing of Terrorism) is paired with AML as AML/CFT — regulations preventing use of crypto to fund terrorist activities.

  2. A DeFi protocol that operates without any central operator most likely faces which unique regulatory challenge?

    Answer: Difficulty identifying a responsible party for regulatory compliance

    Fully decentralized protocols with no controlling entity create enforcement challenges because regulators struggle to identify who is legally responsible for compliance.

  3. The 'Office of Foreign Assets Control' (OFAC) affects crypto businesses by:

    Answer: Maintaining sanctions lists that prohibit transactions with designated individuals and entities

    OFAC enforces US economic sanctions, and crypto exchanges must screen transactions against OFAC's SDN list to avoid processing payments for sanctioned parties.

  4. Under US law, which type of crypto transaction is most clearly subject to capital gains tax?

    Answer: Selling Bitcoin for USD at a profit

    Selling cryptocurrency for fiat currency at a profit is a clearly taxable disposition event generating capital gains under IRS guidance.

  5. What does 'proof of reserves' mean in a regulatory compliance context?

    Answer: Cryptographic auditing method where exchanges prove they hold sufficient assets to cover customer funds

    Proof of reserves uses cryptographic attestations (often Merkle trees) to verify that an exchange holds customer assets 1:1, addressing solvency concerns highlighted by the FTX collapse.

  6. Which legal concept allows US regulators to pursue foreign crypto companies that serve US customers?

    Answer: Long-arm jurisdiction

    Long-arm jurisdiction allows US courts and regulators to assert authority over foreign entities that conduct business with or affect US residents, regardless of where the company is incorporated.

  7. What is the primary concern regulators have with 'privacy coins' like Monero?

    Answer: They obscure transaction trails making AML/KYC compliance nearly impossible

    Privacy coins use cryptographic techniques (ring signatures, zk-proofs) to hide sender, receiver, and transaction amounts, preventing the blockchain analysis that AML compliance relies on.