CBP Legal, Compliance, and Economic Implications of Bitcoin 1 — Questions and Answers
Question 1: Which U.S. regulatory agency primarily oversees Bitcoin-related financial activities?
- Federal Reserve
- Financial Crimes Enforcement Network (FinCEN) (Correct answer)
- Federal Communications Commission (FCC)
- Consumer Financial Protection Bureau (CFPB)
Correct answer: Financial Crimes Enforcement Network (FinCEN)
The Financial Crimes Enforcement Network (FinCEN) regulates Bitcoin transactions to prevent money laundering and other financial crimes.
Question 2: How does Bitcoin affect traditional banking systems?
- It requires banks to hold Bitcoin reserves
- It reduces reliance on traditional banks by enabling direct transactions (Correct answer)
- It increases the demand for cash transactions
- It eliminates the need for international trade regulations
Correct answer: It reduces reliance on traditional banks by enabling direct transactions
Bitcoin provides an alternative to traditional banking by enabling peer-to-peer transactions without intermediaries.
Question 3: What is a key compliance requirement for Bitcoin exchanges in the U.S.?
- They must allow anonymous transactions
- They must comply with Know Your Customer (KYC) regulations (Correct answer)
- They must operate without government oversight
- They must fix Bitcoin prices to reduce volatility
Correct answer: They must comply with Know Your Customer (KYC) regulations
Bitcoin exchanges must follow Know Your Customer (KYC) regulations to verify customer identities and prevent illicit activities.
Question 4: Why is Bitcoin considered a hedge against inflation?
- Because Bitcoin is controlled by a central bank
- Because it has a fixed supply and cannot be inflated (Correct answer)
- Because Bitcoin prices never fluctuate
- Because it is pegged to gold reserves
Correct answer: Because it has a fixed supply and cannot be inflated
Bitcoin's fixed supply of 21 million coins prevents inflationary devaluation, unlike fiat currencies that can be printed indefinitely.
Question 5: What is a major risk of using Bitcoin for financial transactions?
- Transactions are subject to frequent chargebacks
- Bitcoin transactions are irreversible (Correct answer)
- Bitcoin transactions are always anonymous
- Bitcoin is immune to hacking
Correct answer: Bitcoin transactions are irreversible
Bitcoin transactions are irreversible, meaning that once a payment is made, it cannot be undone.
Question 6: Which country was the first to adopt Bitcoin as legal tender?
- United States
- El Salvador (Correct answer)
- Japan
- Switzerland
Correct answer: El Salvador
El Salvador became the first country to adopt Bitcoin as legal tender in 2021, allowing it to be used alongside the U.S. dollar.
CBP Legal, Compliance, and Economic Implications of Bitcoin 1
Which U.S. regulatory agency primarily oversees Bitcoin-related financial activities?