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Legal, Compliance, and Economic Implications of Bitcoin Flashcards

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Read the first 7 Legal, Compliance, and Economic Implications of Bitcoin flashcards as text

  1. Which country was the first to adopt Bitcoin as official legal tender?

    Answer: El Salvador

    El Salvador became the first country in the world to adopt Bitcoin as legal tender in September 2021 under the Bitcoin Law.

  2. What is 'regulatory arbitrage' in the context of Bitcoin businesses?

    Answer: Relocating or structuring operations to take advantage of more favorable regulatory jurisdictions

    Regulatory arbitrage occurs when businesses locate or structure themselves in jurisdictions with lighter regulatory burdens to reduce compliance costs.

  3. Under U.S. securities law, which test is primarily used to determine whether a Bitcoin-related token is a security?

    Answer: The Howey Test

    The Howey Test determines whether an asset is an investment contract (and thus a security) based on whether it involves an investment of money in a common enterprise with profits expected from the efforts of others.

  4. What is the significance of the FATF (Financial Action Task Force) guidelines for Bitcoin businesses globally?

    Answer: FATF recommendations influence how member countries regulate virtual asset service providers

    FATF issues non-binding recommendations that member states are expected to implement, significantly shaping how countries regulate virtual asset service providers (VASPs).

  5. Which economic principle describes Bitcoin's fixed supply cap of 21 million coins as a deflationary feature?

    Answer: Sound money / hard money principle

    Bitcoin's fixed supply cap embodies the 'hard money' or 'sound money' principle, meaning its supply cannot be inflated by any authority, unlike fiat currencies.

  6. In the U.S., which agency has claimed jurisdiction over Bitcoin derivatives and futures contracts?

    Answer: Commodity Futures Trading Commission (CFTC)

    The CFTC has asserted jurisdiction over Bitcoin as a commodity and regulates Bitcoin-related derivatives and futures contracts.

  7. What is a key legal risk for U.S. businesses that accept Bitcoin payments without proper record-keeping?

    Answer: Failing to accurately report taxable income and capital gains to the IRS

    Without proper records of the cost basis and fair market value at time of receipt, businesses cannot accurately calculate taxable income, exposing them to IRS penalties.