A crypto lending platform uses a smart contract to manage collateralized loans. During a routine upgrade, a bug is introduced that allows borrowers to withdraw collateral without repaying. The team detects the bug after a few transactions have been exploited. What is the most immediate step in the incident response plan?

Contact the affected borrowers to explain the situation.

Prepare a press release to inform the public.

Pause the smart contract to halt further exploitation.

Analyze the bug to determine its root cause.

A crypto exchange holds customer funds in a hot wallet for withdrawals. They are concerned about the risk of a private key compromise. Which combination of controls would best mitigate this risk while maintaining operational efficiency?

Use a hardware security module (HSM) but allow any administrator to authorize withdrawals.

Keep the private key on a single server with strong encryption.

Store all funds in a cold wallet and require a manual transfer process for every withdrawal.

Use a multi-signature wallet with keys distributed among multiple executives and require two of three signatures for withdrawals.

A blockchain-based asset manager needs to provide regular risk reports to its board and regulators. The reports must include the current exposure to smart contract vulnerabilities and the status of AML compliance. What is the most effective way to establish this reporting mechanism?

Hire an external auditor to produce a report every quarter.

Publish the risk report on the company's public website.

Automate the collection of on-chain data and integrate it with the existing risk management dashboard.

Ask the development team to manually compile a report monthly.

A blockchain-based asset management firm wants to implement continuous monitoring of its smart contracts. Which metric would be MOST useful for detecting unusual activity that could indicate a security incident?

The price of the protocol's governance token.

The number of transactions that revert due to errors.

The number of active users on the platform.

The total value locked (TVL) in the protocol.

EC-CouncilBlockchain Fintech Certification

Domain 8Objective 5

Risk Management in Blockchain Finance BFC Practice Questions (Page 9)

Part of the Governance, Compliance, and Risk Management domain, which makes up ~12% of our current practice bank.

50questions here

10free pages

7concepts

Questions 41–45

41application · medium
A crypto lending platform uses a smart contract to manage collateralized loans. During a routine upgrade, a bug is introduced that allows borrowers to withdraw collateral without repaying. The team detects the bug after a few transactions have been exploited. What is the most immediate step in the incident response plan?
Select an answer first
42application · medium
A crypto exchange holds customer funds in a hot wallet for withdrawals. They are concerned about the risk of a private key compromise. Which combination of controls would best mitigate this risk while maintaining operational efficiency?
Select an answer first
43application · medium
A blockchain-based asset manager needs to provide regular risk reports to its board and regulators. The reports must include the current exposure to smart contract vulnerabilities and the status of AML compliance. What is the most effective way to establish this reporting mechanism?
Select an answer first
44application · medium
A blockchain-based asset management firm wants to implement continuous monitoring of its smart contracts. Which metric would be MOST useful for detecting unusual activity that could indicate a security incident?
Select an answer first
45foundation · easy
In a decentralized blockchain finance (DeFi) protocol, which governance risk arises when a small group of token holders accumulates enough voting power to control protocol decisions?
Select an answer first

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Risk Management in Blockchain Finance BFC Practice Questions (Page 9)

Questions 41–45

A crypto exchange holds customer funds in a hot wallet for withdrawals. They are concerned about the risk of a private key compromise. Which combination of controls would best mitigate this risk while maintaining operational efficiency?

A blockchain-based asset manager needs to provide regular risk reports to its board and regulators. The reports must include the current exposure to smart contract vulnerabilities and the status of AML compliance. What is the most effective way to establish this reporting mechanism?

A blockchain-based asset management firm wants to implement continuous monitoring of its smart contracts. Which metric would be MOST useful for detecting unusual activity that could indicate a security incident?

In a decentralized blockchain finance (DeFi) protocol, which governance risk arises when a small group of token holders accumulates enough voting power to control protocol decisions?

Keep studying — Governance, Compliance, and Risk Management