CVCLD flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Virtual Currency

A digital representation of value used as a medium of exchange, unit of account, or store of value that is not legal tender and lacks a sovereign issuer, though it can be exchanged for fiat.

Proof of Stake

A consensus mechanism where validators lock economic stake to propose and attest blocks; dishonest behavior is punished by slashing the staked amount, giving probabilistic finality.

Private Key

A secret cryptographic value that authorizes spending from a blockchain address. Whoever holds it controls the funds, and loss or disclosure is generally irreversible.

Hard Fork

A permanent, backward-incompatible change to a blockchain's consensus rules that splits the network into two chains unless all nodes upgrade to the new rules.

Beneficial Ownership Threshold

The ownership percentage, commonly 25%, at which a natural person must be identified as a beneficial owner of a legal entity customer during customer due diligence.

Enhanced Due Diligence

Additional scrutiny applied to higher-risk customers such as PEPs or those in high-risk jurisdictions, including source-of-wealth review and senior management approval before onboarding.

Travel Rule

A requirement that originator and beneficiary information accompany virtual asset transfers above a set threshold, obliging firms to conduct due diligence on counterparty providers.

Suspicious Activity Report

A confidential filing made to the financial intelligence unit when a firm suspects funds are linked to criminal activity; the customer must not be tipped off about the filing.

Howey Test

The four-part test for an investment contract: investment of money, in a common enterprise, with an expectation of profits, derived from the efforts of others.

Security Token

A digital asset that satisfies securities law criteria, triggering registration or exemption requirements, disclosure obligations, and licensing for intermediaries that trade or custody it.

Commodity Derivatives

Futures, options, and swaps whose value references an underlying asset; when the underlying is a commodity, these instruments fall under commodity regulator oversight.

Accredited Investor

A category of investor meeting income, net worth, or professional certification criteria, permitting participation in private placements exempt from full public registration.

Money Transmission

Receiving money or monetary value from one person and transmitting it to another location or person, including via electronic means, which typically requires a license.

Permissible Investments

The categories of high-quality, liquid assets a licensed transmitter may hold to cover outstanding customer obligations, such as cash, government securities, or insured deposits.

Surety Bond

A bond obtained by a licensee to protect the licensing jurisdiction and claimants against the licensee's failure to meet obligations, required in a fixed minimum amount.

Agent of Licensee

A person or entity authorized to conduct money transmission on behalf of a licensed provider, often subject to registration, oversight, and recordkeeping duties by the licensee.

Adjusted Basis

The original acquisition cost of an asset plus capitalized costs such as fees, used to compute gain or loss when the asset is sold or exchanged.

Staking Income

Rewards earned for validating or delegating to a proof-of-stake network, generally taxed as ordinary income at fair market value when received and establishing basis.

Crypto-to-Crypto Exchange

A swap of one virtual currency for another, which is a taxable disposition in property-based regimes even though no fiat currency is received by the taxpayer.

Specific Identification

A lot-tracking method where the taxpayer designates which units were sold, potentially optimizing gain or loss treatment compared with default first-in, first-out ordering.

Unfair or Deceptive Practices

Conduct that materially misleads a reasonable consumer or causes substantial unavoidable injury, forming the basis for consumer protection enforcement against crypto firms.

Customer Asset Segregation

Holding client funds and crypto apart from the firm's own operating assets, with regular reconciliation, so that customer property is protected on insolvency.

Rug Pull

A fraud where project insiders abandon a token or drain liquidity after attracting investor funds, leaving holders with worthless or illiquid assets.

Influencer Disclosure

The requirement that compensated promoters of a crypto product clearly reveal the payment and avoid misleading performance claims in their marketing communications.

Strict Liability Sanctions

The principle that a sanctions violation does not require intent or knowledge; a firm can be penalized for dealing with a blocked person even unknowingly.

Blocked Property

Assets in which a sanctioned person holds an interest; they must be frozen, reported to the regulator, and not dealt with absent a specific license.

IP Geofencing

Blocking access to a platform based on the user's network location, used to restrict services in sanctioned or unlicensed jurisdictions, though VPN use can circumvent it.

Export Controls

Rules restricting the transfer of certain technology, including encryption software and related technical data, to foreign persons, countries, or restricted end users.

Three Lines of Defense

A governance model where business units own risk, compliance and risk functions oversee it, and internal audit provides independent assurance to the board.

Residual Risk

The risk remaining after existing controls are applied, calculated by adjusting inherent risk for control effectiveness and used to prioritize remediation and resources.

Risk Appetite Statement

A board-approved declaration of the types and levels of risk the firm is willing to accept, guiding strategy, limits, and compliance resource allocation.

Key Risk Indicator

A measurable metric, such as alert backlog or training completion, that signals changes in the firm's risk profile and is reported to senior management and the board.