Comparing TradFi, CeFi, and DeFi BFC Practice Questions (Page 8)

Questions 36–40

1. 36application · medium

   A compliance officer at a traditional bank is assessing the regulatory risk of partnering with a DeFi lending protocol. The officer notes that the protocol has no identifiable legal entity, no KYC/AML controls, and operates globally. Which regulatory concern is most directly raised by these characteristics?

   • AThe protocol's global reach ensures it is subject to multiple jurisdictions, which simplifies compliance.
   • BThe absence of a legal entity makes it difficult to assign accountability and enforce regulatory actions.
   • CThe lack of KYC/AML controls is acceptable because DeFi is outside the scope of financial regulations.
   • DThe protocol's smart contracts are likely to contain bugs that will cause financial loss.
   Reveal Solution Discussion Select an answer first
2. 37expert · hard

   A startup is building a cross-border payment system for a region with unreliable banking infrastructure. They are considering using a DeFi stablecoin network. However, they are concerned about the volatility of transaction fees on public blockchains. Which approach would best mitigate this concern?

   • AUse a TradFi remittance service, which always has low fees.
   • BUse a public blockchain with high transaction fees to ensure security.
   • CUse a permissioned blockchain with a stablecoin, where fees are controlled by the operator.
   • DUse a DeFi protocol on a public blockchain and accept the fee volatility as unavoidable.
   Reveal Solution Discussion Select an answer first
4. 38application · medium

   A user is deciding between using a CeFi exchange and a DeFi protocol for lending their cryptocurrency. They value customer support and the ability to recover funds if something goes wrong. Which model better meets these needs?

   • ADeFi, because it offers more transparency and control.
   • BBoth are equally good because they are both blockchain-based.
   • CNeither, because cryptocurrency lending is always risky.
   • DCeFi, because it provides customer support and a central point of contact for disputes.
   Reveal Solution Discussion Select an answer first
5. 39foundation · easy

   How does the infrastructure of TradFi typically differ from that of DeFi?

   • ATradFi uses a public blockchain, while DeFi uses a private database.
   • BTradFi uses smart contracts to automate all processes, while DeFi relies on manual reconciliation.
   • CTradFi uses a centralized ledger maintained by the institution, while DeFi uses a public blockchain maintained by a distributed network of nodes.
   • DTradFi and DeFi both use the same type of distributed ledger technology.
   Reveal Solution Discussion Select an answer first
6. 40application · medium

   A global remittance company is evaluating whether to use a DeFi stablecoin for cross-border payments. The company's customers are primarily migrant workers who send small amounts monthly. The company's key metrics are transaction speed, cost, and accessibility. Which advantage of DeFi is most relevant to this use case?

   • ABuilt-in customer support and dispute resolution for failed transactions.
   • BNear-instant settlement and low transaction fees compared to traditional correspondent banking.
   • CGuaranteed exchange rate stability because stablecoins are always pegged 1:1 to fiat.
   • DFull regulatory compliance with all jurisdictions, eliminating legal risks.
   Reveal Solution Discussion Select an answer first