Business and Operational Considerations in Tokenization BFC Practice Questions (Page 6)

Questions 26–30

1. 26application · medium

   A tokenization platform is launching a security token for a private equity fund. The platform must ensure that the private keys controlling the token supply are protected and that only authorized personnel can initiate transfers. Which custody solution should they implement?

   • AUse a hardware wallet that is kept in a safe and only connected to the internet when needed.
   • BStore all private keys on a single server with strong encryption and restrict access to one administrator.
   • CPrint the private keys and store them in a bank vault, with no digital access.
   • DUse a multi-signature wallet with keys distributed among several trusted parties and require multiple approvals for any transaction.
   Reveal Solution Discussion Select an answer first
2. 27expert · hard

   A legal team is structuring a tokenized asset offering for a portfolio of intellectual property (IP) rights. The tokens will represent fractional ownership of the IP. The team must ensure that the legal structure clearly defines ownership rights and transfer restrictions, while also complying with securities laws. Which legal structure is most appropriate?

   • AStructure the tokens as debt instruments to avoid equity-related legal complexities.
   • BIssue tokens that directly represent the IP rights, without an intermediary entity, and rely on the token contract to define ownership.
   • CCreate a special purpose vehicle (SPV) that holds the IP, and issue tokens that represent equity in the SPV, with transfer restrictions embedded in the token contract.
   • DUse a simple agreement for future tokens (SAFT) to defer the legal structure until a later date.
   Reveal Solution Discussion Select an answer first
4. 28application · medium

   A company is tokenizing a portfolio of carbon credits. They need a technology infrastructure that supports the issuance, transfer, and retirement of credits, and they want to ensure that the system can integrate with existing carbon registries. Which infrastructure component is essential?

   • AA smart contract that enforces the rules for issuance, transfer, and retirement, with an API layer to connect to external registries.
   • BA token standard that is unique to the company and not compatible with other platforms.
   • CA private blockchain that is not connected to any external system.
   • DA centralized database that tracks all credit transactions and is updated manually.
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5. 29application · medium

   A company has tokenized a real estate property and distributes rental income to token holders monthly. The company is unsure how to account for the tokens on its balance sheet and how to report the distributions. What should the company do?

   • AConsult with an accounting professional to determine whether the tokens represent debt, equity, or a hybrid instrument, and follow the applicable accounting standard.
   • BClassify the tokens as debt because the distributions are regular and predictable.
   • CClassify the tokens as equity because they represent ownership in the property.
   • DRecord the tokens as a liability and the distributions as interest expense.
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6. 30application · medium

   A security token offering (STO) for a commercial real estate asset has completed. The issuer is now concerned about the risk of a large token holder attempting to manipulate the secondary market. Which mitigation strategy is most effective?

   • AIncrease the total token supply to dilute any single holder's influence.
   • BEncourage the large holder to use a custodial wallet that requires multi-signature approval.
   • CRely on the secondary market's own surveillance systems to detect manipulation.
   • DImplement a token-holding limit and require large transfers to be approved by the issuer.
   Reveal Solution Discussion Select an answer first