Comparing TradFi, CeFi, and DeFi BFC Practice Questions (Page 6)

Questions 26–30

1. 26application · medium

   A financial regulator is drafting guidance for digital asset firms. They want to apply the same anti-money laundering (AML) and know-your-customer (KYC) requirements to DeFi protocols as they do to CeFi exchanges. Which of the following is a primary challenge to this approach?

   • ACeFi exchanges do not use blockchain, so the regulations cannot be applied.
   • BDeFi protocols are already fully compliant with AML/KYC regulations.
   • CDeFi protocols are all anonymous and cannot be traced.
   • DDeFi protocols often lack a central entity to enforce AML/KYC obligations.
   Reveal Solution Discussion Select an answer first
2. 27foundation · easy

   Which of the following best describes the user experience difference between TradFi and DeFi?

   • ATradFi is accessible 24/7 without any verification, while DeFi requires in-person branch visits.
   • BBoth TradFi and DeFi offer identical user experiences with the same level of accessibility.
   • CDeFi provides customer support and dispute resolution, while TradFi requires users to manage their own private keys.
   • DTradFi offers familiar interfaces and customer support, while DeFi requires users to manage private keys and interact with blockchain wallets.
   Reveal Solution Discussion Select an answer first
4. 28application · medium

   A risk analyst is comparing the security profiles of a TradFi bank, a CeFi exchange, and a DeFi lending protocol. The analyst notes that the DeFi protocol's code is open-source and has been audited, but the CeFi exchange has a history of hacks. Which statement accurately reflects the security considerations?

   • AThe DeFi protocol has a different risk profile: users bear smart contract risk, while the CeFi exchange introduces custodial and operational risk.
   • BThe CeFi exchange is safer because it has insurance and regulatory oversight, which DeFi lacks.
   • CThe DeFi protocol is safer because open-source code and audits eliminate all security risks.
   • DThe TradFi bank is the safest because it is insured by the government, so it has no risk.
   Reveal Solution Discussion Select an answer first
5. 29application · medium

   A pension fund is considering investing in a DeFi yield protocol. The fund's trustees are concerned about the lack of regulatory oversight and the complexity of the technology. Which limitation of DeFi is most relevant to the trustees' concerns?

   • ADeFi protocols are always slower than TradFi because they rely on blockchain consensus.
   • BDeFi protocols are often unregulated, which may expose investors to legal and compliance risks.
   • CDeFi protocols are only accessible to accredited investors, limiting participation.
   • DDeFi protocols have no fees, which makes them unsustainable.
   Reveal Solution Discussion Select an answer first
6. 30expert · hard

   A multinational corporation wants to offer a stablecoin-based payment system to its employees in multiple countries. The legal team is concerned about regulatory compliance, and the treasury team wants to minimize counterparty risk. The corporation is considering using a CeFi stablecoin issuer versus a DeFi overcollateralized stablecoin protocol. Which approach best balances the legal team's and treasury team's concerns?

   • AUse a hybrid approach: a regulated CeFi issuer for fiat on/off-ramps and a DeFi protocol for internal settlements, because it balances compliance and counterparty risk.
   • BUse the DeFi overcollateralized stablecoin, because it reduces counterparty risk through collateralization, but it may lack regulatory clarity.
   • CUse a TradFi bank-issued digital currency, because it is fully regulated and has no counterparty risk.
   • DUse the CeFi stablecoin issuer, because it is regulated and provides legal clarity, even though it introduces counterparty risk.
   Reveal Solution Discussion Select an answer first