// IFF607 — Crypto and virtual-assets layering
$CATEGORY: VERITAS/IFF607

::IFF607-Q1::Under FATF's functional approach, a VASP is defined by\: {
    ~Its country of incorporation only#Incorrect. FATF's approach is functional\: an entity performing VASP-type services is in scope regardless of its legal structure or branding.
    =The exchange, transfer or custody services it performs, regardless of form#FATF's approach is functional\: an entity performing VASP-type services is in scope regardless of its legal structure or branding.
    ~Whether it issues its own token#Incorrect. FATF's approach is functional\: an entity performing VASP-type services is in scope regardless of its legal structure or branding.
    ~Whether it operates a public blockchain node#Incorrect. FATF's approach is functional\: an entity performing VASP-type services is in scope regardless of its legal structure or branding.
}

::IFF607-Q2::The 'sunrise issue' in travel-rule implementation refers to\: {
    ~Time-zone delays in transaction settlement#Incorrect. The sunrise issue describes the practical problem of counterparties in different jurisdictions reaching travel-rule compliance at different times, complicating data exchange.
    =Uneven timing and quality of travel-rule adoption across jurisdictions#The sunrise issue describes the practical problem of counterparties in different jurisdictions reaching travel-rule compliance at different times, complicating data exchange.
    ~The requirement to report transactions at sunrise UTC#Incorrect. The sunrise issue describes the practical problem of counterparties in different jurisdictions reaching travel-rule compliance at different times, complicating data exchange.
    ~A specific FATF grace period for African states#Incorrect. The sunrise issue describes the practical problem of counterparties in different jurisdictions reaching travel-rule compliance at different times, complicating data exchange.
}

::IFF607-Q3::The Tornado Cash sanctions designation was legally significant because\: {
    =It was the first time software code was placed on the SDN list, later narrowed on appeal regarding immutable contracts as 'property'#OFAC's designation of Tornado Cash smart contracts was novel, and a 2024 appellate ruling narrowed the theory regarding immutable code as sanctionable property.
    ~It banned all cryptocurrency in the United States#Incorrect. OFAC's designation of Tornado Cash smart contracts was novel, and a 2024 appellate ruling narrowed the theory regarding immutable code as sanctionable property.
    ~It was later fully upheld without modification#Incorrect. OFAC's designation of Tornado Cash smart contracts was novel, and a 2024 appellate ruling narrowed the theory regarding immutable code as sanctionable property.
    ~It applied only to Bitcoin transactions#Incorrect. OFAC's designation of Tornado Cash smart contracts was novel, and a 2024 appellate ruling narrowed the theory regarding immutable code as sanctionable property.
}

::IFF607-Q4::Regulation (EU) 2023/1114 (MiCA) primarily establishes\: {
    ~An EU-wide travel-rule messaging protocol#Incorrect. MiCA is the EU's market-regulation instrument for CASPs and token issuers, distinct from the AML-focused TFR.
    =Licensing, prudential and disclosure requirements for crypto-asset service providers and token issuers#MiCA is the EU's market-regulation instrument for CASPs and token issuers, distinct from the AML-focused TFR.
    ~The CARF tax reporting framework#Incorrect. MiCA is the EU's market-regulation instrument for CASPs and token issuers, distinct from the AML-focused TFR.
    ~A ban on stablecoins in the EU#Incorrect. MiCA is the EU's market-regulation instrument for CASPs and token issuers, distinct from the AML-focused TFR.
}

::IFF607-Q5::CARF and DAC8 are best characterised as\: {
    ~AML travel-rule instruments#Incorrect. CARF and its EU implementing directive DAC8 extend automatic tax-information exchange to crypto-assets, a distinct purpose from AML travel-rule compliance.
    =Tax-transparency automatic-exchange instruments, distinct from AML obligations#CARF and its EU implementing directive DAC8 extend automatic tax-information exchange to crypto-assets, a distinct purpose from AML travel-rule compliance.
    ~Sanctions regimes#Incorrect. CARF and its EU implementing directive DAC8 extend automatic tax-information exchange to crypto-assets, a distinct purpose from AML travel-rule compliance.
    ~Blockchain technical standards#Incorrect. CARF and its EU implementing directive DAC8 extend automatic tax-information exchange to crypto-assets, a distinct purpose from AML travel-rule compliance.
}

::IFF607-Q6::The common-input-ownership heuristic infers shared control because\: {
    =All inputs in a transaction must be signed by the keys of their respective controllers, implying common authorisation of the spend#Because signing a multi-input transaction requires each input's private key, common authorisation implies common control at the time of the transaction.
    ~Blockchain explorers label addresses automatically#Incorrect. Because signing a multi-input transaction requires each input's private key, common authorisation implies common control at the time of the transaction.
    ~Exchanges publish customer lists#Incorrect. Because signing a multi-input transaction requires each input's private key, common authorisation implies common control at the time of the transaction.
    ~Bitcoin transactions are only ever single-input#Incorrect. Because signing a multi-input transaction requires each input's private key, common authorisation implies common control at the time of the transaction.
}

::IFF607-Q7::Monero defeats on-chain clustering primarily because\: {
    ~It is not a real blockchain#Incorrect. Monero's privacy-by-default design defeats the transparency assumptions underlying Bitcoin/Ethereum clustering heuristics.
    =Its default protocol obscures sender, receiver and amount via ring signatures and stealth addresses#Monero's privacy-by-default design defeats the transparency assumptions underlying Bitcoin/Ethereum clustering heuristics.
    ~It has no exchanges#Incorrect. Monero's privacy-by-default design defeats the transparency assumptions underlying Bitcoin/Ethereum clustering heuristics.
    ~It only supports small transaction amounts#Incorrect. Monero's privacy-by-default design defeats the transparency assumptions underlying Bitcoin/Ethereum clustering heuristics.
}

::IFF607-Q8::Commercial blockchain-analytics attribution evidence should be treated in court proceedings as\: {
    ~Conclusive, self-proving fact requiring no corroboration#Incorrect. Attribution is a proprietary, probabilistic inference and should be corroborated with independent evidence before being relied upon as conclusive.
    =A probabilistic inference requiring corroboration and disclosure of the underlying heuristic chain#Attribution is a proprietary, probabilistic inference and should be corroborated with independent evidence before being relied upon as conclusive.
    ~Inadmissible in all jurisdictions#Incorrect. Attribution is a proprietary, probabilistic inference and should be corroborated with independent evidence before being relied upon as conclusive.
    ~Equivalent to a notarised confession#Incorrect. Attribution is a proprietary, probabilistic inference and should be corroborated with independent evidence before being relied upon as conclusive.
}