Blockchain Applications in Financial Services BFC Practice Questions (Page 7)

Questions 31–35

1. 31expert · hard

   A global remittance service wants to use a blockchain to process payments across multiple jurisdictions. They must comply with the EU's General Data Protection Regulation (GDPR), which includes the right to be forgotten. However, blockchain's immutability conflicts with the ability to delete personal data. The company is considering several approaches. Which approach best balances GDPR compliance with the benefits of blockchain?

   • AUse a private blockchain where the operator can rewrite or delete data when required.
   • BStore personal data off-chain in an encrypted database and only store hashes on-chain, with a mechanism to delete the off-chain data.
   • CStore all personal data on-chain but encrypt it so that only authorized parties can read it.
   • DAvoid blockchain entirely and use a traditional database to ensure GDPR compliance.
   Reveal Solution Discussion Select an answer first
2. 32application · medium

   A commodity trading firm wants to tokenize gold to enable fractional trading. They want to ensure that each token represents a specific amount of physical gold held in a vault. Which mechanism is essential to maintain the token's value?

   • AA smart contract that automatically adjusts the token price based on market demand.
   • BA decentralized autonomous organization (DAO) that votes on gold purchases.
   • CRegular audits by a third party to verify that the vault holds the corresponding amount of gold.
   • DA public blockchain that records token transfers only.
   Reveal Solution Discussion Select an answer first
4. 33application · medium

   A trade finance consortium of banks, exporters, and importers wants to digitize letters of credit to reduce document fraud and processing time. They need a system that all parties can trust, but they also require that only authorized members can view transaction details. Which blockchain deployment model is most appropriate?

   • AA hybrid system using email for document exchange and a public blockchain for timestamping.
   • BA permissioned blockchain where all consortium members run nodes and have role-based access controls.
   • CA private database managed by one bank with read-only access for other members.
   • DA public blockchain where all transaction details are visible to anyone.
   Reveal Solution Discussion Select an answer first
5. 34application · medium

   A startup wants to offer decentralized lending where users can deposit crypto assets and borrow against them. They want to automate interest rate calculations based on supply and demand. Which DeFi mechanism best achieves this?

   • AA fixed interest rate set at the time of the loan and never changed.
   • BA centralized database that a team of analysts updates daily with new interest rates.
   • CAn interest rate determined by a random oracle to prevent manipulation.
   • DA smart contract that adjusts interest rates algorithmically based on the utilization ratio of the lending pool.
   Reveal Solution Discussion Select an answer first
6. 35application · medium

   An exporter and an importer are using a letter of credit (LC) process that involves multiple banks and paper documents. They want to reduce fraud and delays. Which blockchain-based solution directly addresses these issues?

   • AA shared, permissioned blockchain where all parties can view and verify the LC and shipping documents in real time.
   • BA centralized database managed by the importer's bank only.
   • CA public blockchain where anyone can view the LC details.
   • DAn email-based system where documents are sent to all parties simultaneously.
   Reveal Solution Discussion Select an answer first