Comparing TradFi, CeFi, and DeFi BFC Practice Questions (Page 10)

Questions 46–50

1. 46expert · hard

   A development bank wants to provide microloans to small farmers in a developing country. The farmers have no formal credit history, limited internet connectivity, and rely on mobile money. The bank is considering a DeFi lending protocol. Which of the following is the most significant barrier to this use case?

   • ADeFi protocols do not support mobile money integration.
   • BDeFi protocols require a stable internet connection and a compatible wallet, which may be unavailable.
   • CDeFi protocols cannot handle small loan amounts.
   • DDeFi protocols are illegal in developing countries.
   Reveal Solution Discussion Select an answer first
2. 47application · medium

   A remittance company wants to reduce cross-border transfer fees and settlement times. They are considering using a DeFi stablecoin for transfers instead of the traditional SWIFT network. Which of the following is a key advantage of the DeFi approach?

   • AIt guarantees no price volatility because stablecoins are always pegged 1:1.
   • BIt provides the same level of consumer protection as traditional banking.
   • CIt eliminates all regulatory requirements for cross-border transfers.
   • DIt allows near-instant settlement and lower fees compared to traditional correspondent banking.
   Reveal Solution Discussion Select an answer first
4. 48application · medium

   A fintech startup wants to offer cross-border remittances to unbanked users in emerging markets. The founders are weighing a CeFi exchange-based model against a DeFi protocol. Their main concerns are minimizing the risk of a single point of failure and ensuring users retain control of their funds. Which model best aligns with these concerns?

   • ACeFi, because regulated exchanges provide stronger consumer protections and insured custody, which reduces operational risk.
   • BDeFi, because smart contracts execute transactions without a central operator, reducing single-point-of-failure risk and keeping custody with users.
   • CA hybrid model using a centralized exchange for fiat on/off-ramps and DeFi for settlement, because it balances regulation with decentralization.
   • DTradFi, because banks are heavily regulated and have deposit insurance, making them the safest option for unbanked users.
   Reveal Solution Discussion Select an answer first
5. 49foundation · easy

   What is a key advantage of DeFi from a user's perspective compared to TradFi?

   • AUsers can rely on a central authority to reverse fraudulent transactions.
   • BUsers receive personalized financial advice from dedicated relationship managers.
   • CUsers are protected by government deposit insurance on all their funds.
   • DUsers have full control over their assets and can access services without permission from a central authority.
   Reveal Solution Discussion Select an answer first
6. 50foundation · easy

   How does CeFi typically approach regulatory compliance compared to DeFi?

   • ACeFi platforms use smart contracts to automatically comply with all regulations, while DeFi relies on manual compliance.
   • BCeFi platforms often implement KYC/AML procedures and may obtain licenses, while DeFi protocols generally do not require user identification.
   • CCeFi platforms are completely unregulated, while DeFi protocols are fully licensed and supervised.
   • DBoth CeFi and DeFi are equally regulated with identical compliance requirements.
   Reveal Solution Discussion Select an answer first