CCE Regulatory & Legal Framework 4 — Questions and Answers
Question 1: Which Wyoming law, enacted in 2019, created a new type of bank charter specifically designed to serve cryptocurrency businesses?
- Special Purpose Acquisition Company Act
- Special Purpose Depository Institution (SPDI) Act (Correct answer)
- Digital Asset Custodian Act
- Crypto-Friendly Trust Charter Act
Correct answer: Special Purpose Depository Institution (SPDI) Act
Wyoming's Special Purpose Depository Institution (SPDI) Act created a new bank charter allowing crypto-focused institutions to hold digital assets and provide financial services without FDIC insurance.
Question 2: Under the EU's Anti-Money Laundering Directive (AMLD5), which entities were first brought under AML obligations in 2020?
- Only centralized exchanges
- Cryptocurrency exchanges and custodian wallet providers (Correct answer)
- All DeFi protocols and smart contracts
- Crypto mining pools with over 100 members
Correct answer: Cryptocurrency exchanges and custodian wallet providers
AMLD5 extended AML/CTF obligations to crypto-to-fiat exchanges and custodian wallet providers for the first time across EU member states.
Question 3: What is the significance of the SEC's 'Regulation D exemption' for many cryptocurrency token sales in the US?
- It exempts all tokens from securities registration if sold only for utility
- It allows securities offerings to be sold to accredited investors without full SEC registration (Correct answer)
- It permits exchanges to list unregistered tokens for 90 days
- It grants DAOs partnership-level tax treatment
Correct answer: It allows securities offerings to be sold to accredited investors without full SEC registration
Regulation D (particularly Rule 506(b) and 506(c)) allows token issuers to raise capital from accredited investors without registering the offering with the SEC, a common structure for SAFTs.
Question 4: Which US enforcement action established that unregistered ICO tokens sold to the public likely constitute unregistered securities offerings?
- SEC v. Telegram Group (2020) (Correct answer)
- CFTC v. Coinbase (2021)
- DOJ v. Binance (2023)
- SEC v. Coinbase (2023)
Correct answer: SEC v. Telegram Group (2020)
In SEC v. Telegram (2020), the court found that Telegram's $1.7 billion Gram token sale was an unregistered securities offering, and Telegram returned funds to investors.
Question 5: Under FATF standards, what risk-based approach element must VASPs apply when determining how to monitor customers?
- Apply the same due diligence to all customers regardless of risk
- Allocate compliance resources proportional to the assessed risk level of each customer (Correct answer)
- Only perform due diligence on customers transacting over $100,000
- Defer all risk assessment to correspondent bank partners
Correct answer: Allocate compliance resources proportional to the assessed risk level of each customer
FATF's risk-based approach requires VASPs to perform enhanced due diligence on higher-risk customers and simplified due diligence on lower-risk customers, allocating resources proportionally.
Question 6: What is the legal concept of 'piercing the corporate veil' as it applies to DAO liability?
- Imposing personal liability on DAO token holders if the DAO lacks proper legal structure (Correct answer)
- Using blockchain forensics to identify anonymous DAO founders
- Requiring DAOs to register as corporations before launching tokens
- Auditing DAO smart contracts for hidden backdoors
Correct answer: Imposing personal liability on DAO token holders if the DAO lacks proper legal structure
Without a recognized legal structure, courts may pierce the corporate veil and hold DAO participants personally liable for the DAO's debts and obligations.
Question 7: Which OFAC designation category would apply to a cryptocurrency mixer used by sanctioned North Korean hackers?
- Specially Designated National (SDN) (Correct answer)
- Foreign Sanctions Evaders (FSE)
- Sectoral Sanctions Identification (SSI)
- Non-SDN Menu-Based Sanctions (NS-MBS)
Correct answer: Specially Designated National (SDN)
OFAC added Tornado Cash to the SDN list in 2022, designating it as a Specially Designated National, prohibiting US persons from transacting with it.
CCE Regulatory & Legal Framework 4
Which Wyoming law, enacted in 2019, created a new type of bank charter specifically designed to serve cryptocurrency businesses?