CCE Regulatory and Legal Frameworks 5

Question 1

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

Accepted Answer

Countering the Financing of Terrorism

Answer

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

Question 2

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

Accepted Answer

Difficulty identifying a responsible party for regulatory compliance

Answer

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

Question 3

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

Accepted Answer

Maintaining sanctions lists that prohibit transactions with designated individuals and entities

Answer

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

Question 4

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

Accepted Answer

Selling Bitcoin for USD at a profit

Answer

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

Question 5

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

Accepted Answer

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

Answer

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.

(CCE) Certified Cryptocurrency Expert Practice Test

(CCE) Certified Cryptocurrency Expert Practice Test

CCE Regulatory and Legal Frameworks 5