CFA Level I · CFA Level I Exam · Introduction to Digital Assets
An investment manager wants to hold digital assets for clients while minimizing the risk of online hacking. The storage approach most likely to meet this goal is:
Cold storage, where private keys are kept offline, is most likely to minimize hacking risk. Hot wallets and software wallets on connected servers stay online, which exposes the keys to remote attack even though they make trading faster and more convenient.
- Aa hot wallet connected to a trading platform
- Bcold storage with private keys held offlineCorrect
- Ca software wallet on the manager's office server
Explanation
Cold storage keeps private keys offline, so remote attackers cannot reach them. Hot wallets and server-based software wallets are internet-connected and therefore exposed to hacking, although they are more convenient for trading.
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