Blockchain Applications in Financial Services BFC Practice Questions (Page 6)

Questions 26–30

1. 26expert · hard

   A bank is developing a smart contract for syndicated loans. The contract must automate interest payments and principal repayment, but it also needs to comply with a regulation that requires a 'cooling-off' period during which borrowers can cancel the loan without penalty. How should the smart contract be designed to satisfy both automation and the regulatory requirement?

   • AUse a multi-signature wallet that requires manual approval from the borrower for each payment.
   • BDeploy the smart contract on a private blockchain and rely on the bank's legal team to manually cancel the contract during the cooling-off period.
   • CInclude a state variable that tracks the loan status and only allows execution of payments after the cooling-off period has elapsed.
   • DAutomate all payments immediately upon loan signing, ignoring the cooling-off period.
   Reveal Solution Discussion Select an answer first
2. 27foundation · easy

   Which approach can help a blockchain-based financial service meet Know Your Customer (KYC) regulatory requirements?

   • AEliminating customer identification entirely to preserve anonymity.
   • BUsing a permissioned blockchain where verified identity data is shared only with authorized parties.
   • CRelying on each user to self-certify their identity without any verification.
   • DStoring all customer identification documents publicly on the blockchain.
   Reveal Solution Discussion Select an answer first
4. 28foundation · easy

   In the context of blockchain-based remittances, what does 'transparency' primarily refer to?

   • AThe central bank can monitor every transaction in real time and reverse it if needed.
   • BThe sender and receiver can view the transaction status and the fees applied at each step.
   • CAll transaction details are visible to the general public, including personal identities.
   • DThe blockchain automatically publishes the bank account numbers of all users.
   Reveal Solution Discussion Select an answer first
5. 29application · medium

   A commodity trading firm wants to tokenize gold bullion to enable fractional trading. They need to ensure that each token is backed by actual physical gold and that the total token supply never exceeds the gold reserves. What is the best way to maintain this 1:1 backing?

   • ARely on the token price to stay pegged to gold without any reserve audits.
   • BAllow anyone to mint tokens by depositing any digital asset as collateral.
   • CUse a trusted custodian to audit gold reserves and a smart contract that only mints tokens when new gold is deposited.
   • DMint a fixed supply of tokens and assume the gold reserves are sufficient.
   Reveal Solution Discussion Select an answer first
6. 30expert · hard

   A DeFi protocol is considering implementing a governance token that gives holders voting power over protocol changes. Regulators have indicated that the token may be classified as a security. What is the best way to reduce the likelihood of the token being classified as a security?

   • ARestrict the token's transferability and limit its use to governance only, with no profit-sharing rights.
   • BMake the token non-transferable but give holders a share of protocol fees.
   • CAllow the token to be freely traded on exchanges and provide dividends to holders.
   • DLaunch the token without any documentation or disclosures.
   Reveal Solution Discussion Select an answer first