C4 Regulations, Compliance & Security — Questions and Answers
Question 1: What is the purpose of KYC regulations in cryptocurrency exchanges?
- To allow anonymous trading
- To eliminate transaction fees
- To track blockchain performance
- To verify user identity (Correct answer)
Correct answer: To verify user identity
KYC (Know Your Customer) rules help prevent money laundering and identity fraud by requiring users to verify their identity.
Question 2: Which global organization develops standards to combat money laundering in crypto?
- IMF
- FBI
- FATF (Correct answer)
- SEC
Correct answer: FATF
The Financial Action Task Force (FATF) issues guidelines to help countries combat money laundering and terrorist financing involving cryptocurrencies.
Question 3: What is one common method to secure a cryptocurrency wallet?
- Disabling updates
- Using public Wi-Fi
- Two-factor authentication (Correct answer)
- Posting keys online
Correct answer: Two-factor authentication
Using two-factor authentication adds an extra layer of protection beyond passwords, enhancing wallet security.
Question 4: Why is regulatory compliance important for crypto businesses?
- To avoid code audits
- To ensure faster transactions
- To attract hackers
- To operate legally and gain trust (Correct answer)
Correct answer: To operate legally and gain trust
Compliance helps ensure operations are legal and transparent, reducing the risk of penalties and building user trust.
Question 5: What does AML stand for in cryptocurrency compliance?
- Anonymous Market Ledger
- Asset Management List
- Anti-Money Laundering (Correct answer)
- Automatic Mining License
Correct answer: Anti-Money Laundering
AML (Anti-Money Laundering) refers to laws and procedures designed to stop criminals from disguising illegally obtained funds as legitimate income.
Question 6: What is a 'cold wallet' in terms of crypto security?
- A wallet for daily transactions
- A hardware wallet stored offline (Correct answer)
- An app that uses cloud sync
- A third-party trading bot
Correct answer: A hardware wallet stored offline
A cold wallet is stored offline, making it less vulnerable to hacking and ideal for securing large amounts of cryptocurrency.
C4 Regulations, Compliance & Security
What is the purpose of KYC regulations in cryptocurrency exchanges?