Cryptocurrency Security and Regulatory Compliance 4

Question 1

What is 'rug pull' fraud in the context of DeFi?

Accepted Answer

When developers abandon a project and abscond with investor funds after removing liquidity

Answer

A rug pull occurs when project developers suddenly withdraw all liquidity from a DeFi pool, leaving investors with worthless tokens and no recourse.

Question 2

Which security feature does multisig (multi-signature) provide for a cryptocurrency wallet?

Accepted Answer

It requires multiple private key signatures before a transaction can be executed

Answer

Multisig wallets require M-of-N key holders to sign a transaction before it is broadcast, reducing single point of failure risk.

Question 3

What was the significance of the SEC v. Ripple (XRP) ruling for crypto regulation?

Accepted Answer

It provided partial clarity by distinguishing institutional sales (securities) from programmatic exchange sales (not securities)

Answer

The 2023 ruling found XRP sales to institutional investors were securities but programmatic sales on exchanges were not, creating a contested but notable regulatory distinction.

Question 4

What is 'social engineering' in the context of cryptocurrency theft?

Accepted Answer

Manipulating people psychologically to reveal private keys or send crypto to fraudsters

Answer

Social engineering exploits human psychology rather than technical vulnerabilities—attackers impersonate support staff, romantic partners, or investment advisors to steal crypto.

Question 5

What is the primary purpose of on-chain analytics tools like Chainalysis in regulatory compliance?

Accepted Answer

To trace the flow of funds and identify illicit activity on public blockchains

Answer

Blockchain analytics firms cluster wallet addresses and trace fund flows to help exchanges, regulators, and law enforcement identify money laundering, sanctions violations, and fraud.

Cryptocurrency Practice Test

Cryptocurrency Practice Test

Cryptocurrency Security and Regulatory Compliance 4