Compliance, Regulatory Standards, and Legal Challenges BFC Practice Questions (Page 2)

Questions 6–10

1. 6application · medium

   A startup is launching a token that provides holders with voting rights and a share of profits from the company's operations. The startup plans to sell the token to retail investors in the US. Which regulatory requirement is most likely to apply?

   • AThe token is subject to the Bank Secrecy Act (BSA) because it is a virtual currency.
   • BThe token is a utility token and is exempt from securities regulation.
   • CThe token must be registered with the SEC as a security, unless an exemption applies.
   • DThe token must comply with the Payment Services Directive (PSD2) because it is a payment token.
   Reveal Solution Discussion Select an answer first
2. 7expert · hard

   A multinational bank is launching a blockchain-based trade finance platform that involves parties in China, Germany, and the United Arab Emirates. The platform will use smart contracts to automate payments upon delivery of goods. The bank's compliance team must address cross-border data transfer and AML obligations. Which approach is most effective?

   • AUse a public blockchain to avoid data localization issues, since public blockchains are not subject to national data laws.
   • BDesign the platform to store data locally in each jurisdiction and use a permissioned blockchain with node operators in each country, while implementing a global AML screening process that respects local data transfer rules.
   • CCentralize all data in the bank's headquarters in Germany and apply German data protection rules to all parties.
   • DExempt the platform from AML obligations because it is a business-to-business (B2B) trade finance solution.
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4. 8application · medium

   A blockchain fintech company is establishing its compliance governance. The company wants to ensure that compliance risks are identified and escalated promptly. Which internal control is most effective for this purpose?

   • AA whistleblower hotline that allows anonymous reporting of compliance concerns.
   • BA monthly compliance newsletter to all employees.
   • CA compliance risk assessment process that is reviewed quarterly by the board.
   • DA policy that requires all employees to sign a code of conduct annually.
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5. 9application · medium

   A decentralized finance (DeFi) protocol is governed by a DAO that holds a treasury of user funds. A smart contract vulnerability is exploited, and users lose funds. The protocol's legal counsel is assessing liability. Which factor is most likely to determine whether the DAO's members face personal liability?

   • AThe open-source license under which the smart contract code was released.
   • BWhether the DAO is registered as a legal entity, such as a limited liability company or foundation, in a jurisdiction that recognizes DAO legal personality.
   • CThe geographic location of the majority of the DAO's token holders.
   • DThe number of smart contract audits the protocol completed before deployment.
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6. 10application · medium

   A mid-sized blockchain payment company is expanding into a new country with strict data protection laws. The compliance team must integrate the new requirements into its existing risk management framework. What is the most effective first step?

   • AConduct a regulatory risk assessment that maps the new country's data protection obligations to the company's current processes and identifies gaps.
   • BDelay the expansion until the company can adopt a uniform global privacy standard that is accepted in all jurisdictions.
   • CImmediately implement the most stringent data protection measures from any jurisdiction the company operates in, to be safe.
   • DHire a local legal advisor and delegate all compliance decisions to them, without updating internal policies.
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