Cryptoasset Anti-Financial Crime Specialist (CCAS) Certification Practice Test

Which factor about a cryptocurrency investment firm is considered a red flag?

1. No registration with regulator or financial intelligence unit

2. Claims of high returns on investments

3. Complicated web domain registration details

4. Multiple product whitepapers

The correct answer is: No registration with regulator or financial intelligence unit

The factor considered a red flag for a cryptocurrency investment firm is the lack of registration with a regulator or financial intelligence unit. An investment firm that operates without the oversight of regulatory bodies is not subject to the same standards of accountability, transparency, and compliance that protect investors. Registration with these entities is crucial as it usually signifies that the firm adheres to legal requirements, undergoes regular audits, and is monitored for suspicious activities, which helps protect investors from fraud, money laundering, and other illicit activities. A firm that is not registered may be attempting to operate outside the law, potentially putting investors' funds at risk without legal recourse. This lack of oversight can lead to issues such as unregulated practices, scams, or insolvency without the possibility of recovery for investors. Thus, the absence of such registration is a significant warning sign and should give potential investors pause when considering where to invest their money.