Cryptocurrency Security and Regulatory Compliance 5

Question 1

What does 'SAR' stand for and when must a crypto business file one?

Accepted Answer

Suspicious Activity Report — filed when transactions suggest money laundering or other crimes

Answer

SARs (Suspicious Activity Reports) must be filed with FinCEN within 30 days when a crypto business detects transactions involving $5,000+ that may involve criminal activity.

Question 2

Which type of crypto scam involves offering guaranteed high returns through a fake investment platform that pays early investors with new investors' funds?

Accepted Answer

Ponzi scheme

Answer

A crypto Ponzi scheme promises high returns and uses new investor deposits to pay earlier investors until the scheme collapses—BitConnect was a famous example.

Question 3

What security vulnerability does a 'reentrancy attack' exploit in smart contracts?

Accepted Answer

It calls back into the vulnerable contract before the first execution finishes, draining funds

Answer

Reentrancy attacks (famously used in The DAO hack) call a vulnerable function recursively before the contract updates its internal state, allowing repeated fund withdrawals.

Question 4

Under the U.S. Infrastructure Investment and Jobs Act (2021), which parties were controversially designated as 'brokers' required to report crypto transactions to the IRS?

Accepted Answer

Broadly defined parties including potentially miners, validators, and wallet developers

Answer

The law's broad 'broker' definition sparked controversy as it could apply to miners, validators, and software developers who don't have customer information to report.

Question 5

What is the purpose of a 'crypto mixer' or 'tumbler,' and why is it legally problematic?

Accepted Answer

A service that pools and shuffles transactions to obscure their origin, raising money laundering concerns

Answer

Mixers obscure the blockchain trail between sender and recipient; OFAC sanctioned Tornado Cash in 2022 for facilitating over $7 billion in money laundering.

Cryptocurrency Practice Test

Cryptocurrency Practice Test

Cryptocurrency Security and Regulatory Compliance 5