Risk Warning

Dealing in Digital Assets involves a high degree of risk, and, therefore, should be undertaken only if you are capable of evaluating the risks involved and able to bear the risks of a complete loss of all capital used to purchase and deal in Digital Assets. You should carefully consider the risks described below, which are not intended to be exhaustive and do not necessarily include all of the risks to which you are or may be exposed, nor are they all the risks associated with dealing in Digital Assets. You should only deal in Digital Assets where you have carefully considered that they are an appropriate investment given your financial situation and tolerance for risk.

Investment in Digital Assets is unregulated, may not be suitable for retail investors and the entire amount invested may be lost. Investments in early-stage projects involve a high level of risk, so it is necessary to properly understand their business model.

The prices of Digital Assets are extremely volatile

The prices of Digital Assets have historically been subject to significant fluctuations and are highly volatile, and there is a risk of total loss of value in relation to any Digital Assets. The prices of Digital Assets are established without any mechanisms that ensure their correct formation, such as those used in regulated securities markets. Various factors may influence the market price of Digital Assets, including: (i) the ability of Digital Assets to trade on international markets; (ii) global Digital Asset supply and demand, which can be influenced by market confidence; (iii) general economic factors and expectations; and (iv) changes in the Digital Assets themselves. A decrease in the price of a single cryptoasset may cause volatility in the entire cryptoasset industry and may affect your Digital Assets.  Such volatility in the price of the Digital Assets may result in significant or total loss over a short period of time.

Risks associated with the blockchain protocol

Distributed ledger technologies are still in an early stage of development as many of these networks  have been created very recently, so they may not be sufficiently tested and there may be significant failures in their operation and security.

Because Digital Assets are based on blockchain protocols, any malfunction, breakdown or abandonment of a blockchain protocol may have a material adverse effect on them. Moreover, advances in cryptography, or technical advances such as the development of quantum computing, could present risks to Digital Assets by rendering ineffective the cryptographic consensus mechanism that underpins the blockchain protocol. The registration of transactions in networks based on distributed ledger technologies is carried out through consensus protocols that may be susceptible to attacks that attempt to modify the register. If they were to be successful there would be no alternative register that backs up the transactions and hence the balances corresponding to the public keys and therefore all the Digital Assets could be lost.

We have no control over blockchain protocols, which may be updated or modified, and we cannot guarantee their functionality, security or availability.

Forks and airdrops

The underlying protocols of Digital Assets may be subject to forks and airdrops, and these may alter the value or function of a Digital Asset, or may result in multiple versions of a Digital Asset (leading to volatility as one version becomes dominant over another, which may lose its value). In the event of a fork or airdrop, there is a risk that we may need to temporarily suspend operations in relation to that fork or airdrop without providing advance notice to you. We will use commercially reasonable endeavours to provide you with notice of forks or airdrops in relation to Digital Assets, and whether we / our (sub)custodian will support them, by publishing such a notice on our Site, and you agree that you will read such notices in order to make a decision as to how to deal in those Digital Assets.

We (and the (sub)custodians we use) do not accept any obligation to support any specific fork, airdrop or similar distribution event, and we / the (sub)custodian are not liable for any determination made in this respect. You accept that the fact that the (sub)custodians we use may support a fork or airdrop does not in any way oblige us to also accept that fork or airdrop.

Risk of hacking and software and security weaknesses

The anonymity of Digital Assets can make them a target for cyber criminals, since if credentials or private keys are stolen, the Digital Assets may be transferred to addresses that make their recovery difficult or impossible.

Hackers or other malicious groups or organizations may attempt to interfere with Digital Assets in a variety of ways, including malware attacks, denial of service attacks, consensus-based attacks, Sybil attacks, smurfing and spoofing, as well as attacks which overpower the consensus-based mechanism on which the blockchain is built and attacks which interfere with or otherwise cause nodes to malfunction (nodes are computers / hardware devices that help maintain the blockchain).

There is also an inherent risk that the software and related technologies and theories we use could contain Viruses. Viruses could cause, inter alia, complete loss of Digital Assets, or could negatively affect the Site or our Services.

You acknowledge that there are high risks associated with the use of internet-based systems, including, but not limited to, fraud, cyber-attack, network and communication failures, spoofing and phishing attacks linked to Digital Assets and that due to technological constraints, Qovex may prevent the access to or use of your Digital Assets.

Risks associated with regulation

The regulatory status of Digital Assets and distributed ledger technology may be unclear or unsettled in certain jurisdictions. The acceptance of Digital Assets as a medium of exchange is still limited and there is no legal obligation to accept them. It is difficult to predict how or whether regulatory agencies may apply existing regulation with respect to Digital Assets. It is likewise difficult to predict how or whether legislatures or regulatory agencies may in the future implement changes to law and regulation affecting Digital Assets. Regulatory actions could negatively impact Digital Assets in various ways, including, for purposes of illustration only, through a determination that a Digital Asset is regulated financial instrument that requires registration or licensing. We may cease providing Services in relation to a Digital Asset in the event that regulatory actions, or changes to law or regulation, make it (potentially) illegal to provide them.

You are solely responsible to have a thorough understanding of, and to ensure your compliance with, all laws, rules, and regulations applicable to you or in your jurisdiction, which include, but are not limited to, compliance with tax, reporting and disclosure obligations. You acknowledge that in your jurisdiction Qovex may not be regulated as a financial institution and therefore, that safeguards applicable to you may vary, and the resolution of any dispute might be costly and fall outside the competence of the authorities in your country.

Digital Assets have no refund rights or similar features

Digital Assets may lack the liquidity needed to unwind an investment without significant losses, as their circulation to both retail and professional investors may be limited.

After Transaction is executed, you will have no right to cancel a Transaction or to receive a refund or otherwise require us to exchange Digital Assets for a certain amount of fiat currency. As a result, if there is not sufficient demand or interest in Digital Assets, or if in the future there are limits on the transferability of, or limited liquidity for, Digital Assets, then you may lose all or a portion of the value of your holdings.

You may lack information for monitoring Digital Assets

You may not be able to obtain all information you want from time to time regarding the Digital Assets you deal in. Even if you do receive such information, you may not receive it on a timely basis. It is possible that you may not be aware of materially adverse changes that have occurred with respect to Digital Assets in a timely manner. As a result of these difficulties, as well as other uncertainties, you may not have accurate or accessible information relating to your Digital Assets, which could prevent you from taking actions with the potential to prevent adverse consequences relating to your dealing in Digital Assets.

Risks associated with safeguarding your fiat currency

We use our banking providers in order to facilitate the receipt of fiat currency from and payments to Members. Our banking providers DO NOT transfer, exchange or provide any services in connection with Digital Assets. Your fiat currency will be held in account(s) at our banking providers in the name of Qovex together with fiat currency deposited by or otherwise held by us on behalf of other Members.

Where possible in a relevant jurisdiction which recognises the concept of a trust and/or client account, we will notify the relevant banking provider that the bank account is a client account in which we hold fiat currency on behalf of Members and/or subject to the terms of a trust. You will, in any event, remain a beneficial owner of rights to the fiat currency that we hold on your behalf with our banking providers and will remain beneficially entitled to the rights we have with respect to that fiat currency to the extent permissible under the applicable laws. We will maintain detailed records of all fiat currency held on behalf of Members. Whilst your fiat currency may be subject to the terms of a trust, where permissible, and Qovex uses reasonable care in the appointment of its banking providers, in the event of a banking provider becoming insolvent or entering into an insolvency process in a relevant jurisdiction, Qovex may have only an unsecured claim against the banking provider, and Members’ fiat currency balances may be at risk (subject to any protections provided at by applicable laws). It is possible that you may receive some compensation from a relevant deposit guarantee or compensation scheme in respect of any losses arising from a banking provider's insolvency, depending on the circumstances. We cannot guarantee that you will be able to claim compensation.

Where applicable, the terms of the trust are designed to protect your rights with respect to your fiat currency, including in the event of our insolvency or default. In such circumstances, although your fiat currency should be treated separately from our own assets and ring-fenced for return to you, we cannot guarantee that you will get back the full amount of your fiat currency held through us. A shortfall could arise, for example, by reason of fees that are found to be payable to any officeholder appointed in the event of our insolvency or other expenses of the insolvency process, or other amounts payable by order of the court, or where a banking provider fails to release your fiat currency. It is possible that the trust which protects your fiat currency would not be recognised as valid in jurisdictions outside England and Wales where banking providers may be located from time to time, which could result in a shortfall in the fiat currency available to be returned to you. You should also note that there could be a delay in the return of your fiat currency in the event of our insolvency or default. You acknowledge and agree that whilst we endeavour where possible to mitigate the risks posed by banking provider insolvencies by holding fiat currency with multiple different banking providers, you may share pro rata with other Members in any shortfall that affects the fiat currency we hold for you with an insolvent banking provider. It is possible that in the event of our insolvency, multiple different fiat currency accounts could be pooled together by an insolvency officeholder or by order of the court for the purposes of allocating any shortfalls and pro rata sharing, which may affect the amount of fiat currency that is returned to you. Your fiat currency will not be protected by a statutory compensation or deposit guarantee schemes in the event of our insolvency or default.

Risks associated with safeguarding your Digital Assets

The custody of Digital Assets is a large responsibility since they can be lost in their entirety in the event of theft or loss of private keys. Please ensure you identify the entity that carries out the custody of the advertised Digital Assets you plan to purchase or sell, the country in which it is carried out and the applicable legal framework.

We engage with third-party custody providers (i.e. custodians and/or sub-custodians) who assist us with holding your Digital Assets. Your Digital Assets may be pooled with Digital Assets held for other Members, and we do not acquire any right, title or interest in the Digital Assets of our Members. However, there may be times when Digital Assets held for Members are commingled with Digital Assets held for us, in particular where they reflect our fees pending our withdrawal of them from the relevant wallet. We will maintain detailed records of all Digital Assets which Members hold with us.

Whilst we use reasonable care in the appointment of any (sub)custodians we use, in the event of a third-party (sub)custodian becoming insolvent or entering into an insolvency process in a relevant jurisdiction, you or we may have only an unsecured claim against the (sub)custodian, and your Digital Assets may be at risk of loss. The same risk exists if a (sub)custodian is for any other reason not able to meet its obligations towards you or us. Any such loss shall be shared pari passu between the affected persons.

Digital Assets are not covered by client protection mechanisms such as the Deposit Guarantee Fund or the Investor Guarantee Fund.

Risks related to specific types of tokens

Please note that the risks below are specific to stablecoins, asset-backed tokens, meme coins and wrapped and bridged tokens - and should be carefully considered when using or investing in them. It is essential to conduct your own research, understand these risks, and assess your risk tolerance before engaging with them.

Risks related to stablecoins

Stablecoins are a unique type of cryptoasset, and they come with specific risks that differ from other cryptocurrency products. Stablecoins aim to maintain a stable value linked to another currency, but they are not immune to price fluctuations, and there is no certainty that their value will remain stable or pegged 1:1 to the other currency. The stability of stablecoins may rely on the financial stability and trustworthiness of the issuer. Any issues with the issuer could impact the stability of the stablecoin.

Changes in regulations, including those related to stablecoins, can impact their issuance and use. The ability to buy or sell stablecoins may be influenced by market liquidity, and it may not always be possible to convert them to fiat currency or other assets. Stablecoins are reliant on blockchain technology, and any disruptions or vulnerabilities in the underlying technology can affect their stability. The value of stablecoins may depend on market demand, and a lack of demand could affect their stability and value.

Risks related to asset-backed tokens

Asset-backed tokens, including those backed by physical assets such as gold, carry specific risks. The value of asset-backed tokens may be subject to fluctuations in the market value of the underlying asset (e.g., gold), and such fluctuations can impact the value of the token. The stability of the asset-backed token may be contingent on the financial stability and reliability of the issuer or custodian responsible for backing the token with the underlying asset. Any issues with these entities could impact the token's stability, and therefore the value of such asset-backed token.

Risks related to meme coins

Meme coins may lack inherent value or practical utility and are often driven by social media trends and community sentiment. Their value may not be tied to traditional valuation metrics. Meme coins are known for their extreme price volatility and therefore, investments in meme coins are highly speculative and may involve a high degree of risk. Investors should be prepared for sudden and significant fluctuations in the value of their investment and should only allocate funds they can afford to lose and should be aware of the speculative nature of meme coin investments.

Risks related to DeFi tokens

DeFi tokens are cryptoassets associated with decentralized applications and protocols. Smart contracts governing DeFi protocols may be susceptible to coding errors and vulnerabilities, potentially resulting in exploitation by hackers.  DeFi protocols rely on oracles for provision of external data which could be manipulated or inaccurate, influencing the financial outcomes of the DeFi protocol. DeFi tokens are vulnerable to the risk of developers abandoning the project. DeFi projects are unregulated and new regulations could impact the value of DeFi tokens in future.

Risks related to wrapped and bridged tokens

Wrapped and bridged tokens are tokenized representations of other cryptoassets on a different blockchain. The value of wrapped or bridged tokens is typically backed by collateral of another cryptoasset. The value of the collateral could decline or become volatile which could adversely affect the value of the wrapped or bridged token. If the collateral cryptoassets are held by a custodian, the insolvency of the custodian or failure of the custodian to maintain the collateral could impact the value of the wrapped or bridged token. A malfunction in the bridging infrastructure may result in transfer delays or token losses during their transfer between blockchains. Wrapped and bridged tokens are susceptible to price deviations resulting from demand or liquidity disparities with the underlying cryptoasset, leading to variations in token prices relative to the underlying cryptoassets.

Unanticipated risks

Digital Assets are a part of and operate within a relatively new industry. In addition to the risks included above, there are other risks associated with your dealing in Digital Assets, including those that we cannot reasonably foresee. Additional risks may also materialize as unanticipated variations or combinations of the risks discussed above in this Risk Warning.

If you have any questions or doubts regarding the merits of your potential dealing in Digital Assets, you should seek the advice of an independent financial advisor.