Blockchain & Cryptocurrency Integration Flashcards
7 cards from real CFP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Blockchain & Cryptocurrency Integration flashcards as text
A fintech company integrating crypto payments must comply with FinCEN's Travel Rule. What does this rule require?
Answer: Transmitters must share sender and recipient information for transfers above $3,000
FinCEN's Travel Rule requires financial institutions to pass along certain customer information when transferring funds over $3,000, now extended to virtual asset transfers.
Which type of blockchain architecture would a consortium of banks most likely use for an interbank settlement platform?
Answer: Private permissioned blockchain with known validators
Consortium or private permissioned blockchains allow known institutions to control validator access while retaining distributed ledger benefits like immutability and auditability.
What is 'impermanent loss' in the context of DeFi liquidity provision?
Answer: The temporary reduction in value a liquidity provider experiences compared to simply holding assets
Impermanent loss occurs when the price ratio of pooled assets changes after deposit, meaning the LP would have been better off holding the assets rather than providing liquidity.
Under US tax law, how does the IRS classify cryptocurrency received as payment for services?
Answer: Ordinary income at fair market value on the date received
The IRS treats crypto received for services as ordinary income equal to the fair market value in USD on the receipt date, subject to income and self-employment taxes.
What is the purpose of a blockchain oracle in smart contract applications?
Answer: To provide external real-world data to smart contracts that cannot access it natively
Oracles bridge the gap between blockchain smart contracts and external data sources (prices, weather, events) since blockchains cannot natively access off-chain information.
A fintech startup is considering issuing a utility token to raise capital. Under the Howey Test, the token would be classified as a security if it:
Answer: Represents an investment of money in a common enterprise with expectation of profit from others' efforts
The Howey Test classifies an asset as a security if there is an investment of money in a common enterprise with an expectation of profit derived from others' efforts.
What distinguishes a 'hot wallet' from a 'cold wallet' in cryptocurrency custody?
Answer: Hot wallets are connected to the internet; cold wallets are kept offline for security
Hot wallets are internet-connected and convenient for frequent transactions but more vulnerable to hacks; cold wallets are offline, offering greater security for long-term storage.