Risk disclosure and Warning on crypto assets

Introduction – Crypto-assets can be risky, and your protection, if any, may be limited 

Not all crypto-assets and crypto-asset services are equal nor are they regulated in the same way (if at all). While a new regulation known as MiCA (the Markets in Crypto-Assets Regulation) is now in place in the EU and regulates activities involving certain crypto-assets, most crypto-assets typically remain volatile and highly risky. As such, they may not be suitable for all consumers as a form of investment, payment or exchange. 

Depending on the type of crypto-asset and the provider you might face higher risks and may have only limited or no consumer protection rights (e.g. access to comprehensive information, transparent complaints-handling procedures.). This is especially the case if you use or invest in crypto-assets/cryptoasset services offered by firms established outside the EU, and by providers not regulated under MiCA. 

To better understand the different types of crypto-assets and providers you may encounter take a look at the factsheet Cryptoassets explained: What MiCA means for you as a consumer (https://link.europa.eu/BRv4Gn).

Summary – what are the key risks you may face?

Extreme price movements: The value of most crypto-assets, including some that are regulated, can be very volatile, meaning that their price can fall and rise quickly over short periods of time. You may lose a lot, or even all, of the money invested. 

Liquidity risks:  Crypto-asset markets may experience liquidity constraints, which could limit your ability to sell crypto-assets at the price or time you want. 

Misleading information: Some crypto-assets and related products are aggressively promoted, using information that is confusing, incomplete, inaccurate and at times deliberately misleading. Be alert to the risks of such advertisements, especially on social media where influencers can be incentivised to advertise certain crypto-assets. 

Fraud, scams and hacks:  Numerous fake crypto-asset schemes, hacks and scams exist, and you should be aware that their sole purpose is to scam you out of your money using different techniques. Fraudsters may use phishing emails, social engineering and malicious links, promising unrealistically high returns or claiming to be authorised or regulated when they are not. 

Limited protection: MiCA provides some consumer protection when it comes to specific types of crypto-assets and services (e.g. access to comprehensive information, transparent complaints-handling procedures). However, they are not as extensive as those applicable to more traditional financial products (e.g. you will not benefit from compensation schemes). For cryptoassets or services offered by firms not regulated in the EU, if something goes wrong, you may not benefit from any consumer protection or protections that are less robust than those applicable in the EU. 

Product complexity: The features and risks of crypto-assets, and any products with a crypto-asset underlying, can be difficult to understand. Be careful when buying crypto-assets, or related investment products, especially if you are unsure how their value is determined and what risks are involved. 

This warning and risk disclosure is provided to help you understand the potential risks associated with trading crypto assets. Trading crypto assets involves significant risks of financial loss. By using our services, you acknowledge that you have read, understood and accept these risks, and agree that Kriptomat disclaims liability to the fullest extent permitted by applicable law.

The risks mentioned are illustrative and not exhaustive. Additional risks, including emerging threats, may arise. You are encouraged to educate yourself and remain informed. This notice complements our Terms of Use and other risk-related disclosures.

High-Risk Investment

Crypto assets exhibit high volatility, with values capable of rapid fluctuations. This volatility, combined with the potential lack of liquidity, may result in sudden and significant losses.

The valuation of crypto assets can be influenced by a range of unpredictable factors, including market sentiment, news, software changes, regulation, and security threats. As such, these assets can lose their entire value.

Crypto assets are not issued, backed, or guaranteed by governments or financial institutions and do not fall under deposit guarantee schemes. Their valuation does not follow regulated market mechanisms.

Crypto assets are not covered by investor compensation or deposit guarantee schemes, and their valuation may not follow mechanisms used in regulated financial markets. This reflects their classification under MiCA as unregulated financial instruments distinct from traditional securities and banking products.

Risk of Delisting Crypto Assets

Kriptomat may delist any crypto asset at its discretion. Delisting may result in losses due to impaired liquidity or inability to transfer assets.

In the event of a delisting, Kriptomat will provide reasonable notice where feasible, allowing users to manage their positions accordingly..

Financial Tolerance and Risk Attitude

Trading crypto assets involves high risk. You must evaluate your financial condition, risk tolerance, and suitability to engage in such activities. Do not invest assets you cannot afford to lose.

By using our services, you represent and warrant that you possess the necessary knowledge and understanding of the risks involved, including the risk of total loss of your investment. You should not trade or invest in crypto assets if you do not understand these risks.

Technology and Cybersecurity Risks

Distributed ledger technologies (DLTs) are evolving and may exhibit operational vulnerabilities.

Kriptomat adheres to international cybersecurity standards (ISO 27001 certified) and complies with operational risk and IT management requirements in accordance with Digital Operational Resilience Act (DORA). Despite these efforts, users must be aware that inherent risks associated with blockchain technology and infrastructure may still result in the partial or total loss of crypto assets.

Cyberattacks, theft of private keys, protocol bugs, and system malfunctions can result in irreversible losses. By using Kriptomat, you accept the risks related to technology and the internet.

While Kriptomat implements robust security measures, in the event of hacking, system vulnerabilities, or other incidents leading to asset loss that are beyond our reasonable control, such events may be considered force majeure events under applicable law, subject to regulatory requirements and mandatory consumer protection provisions.

Custody and Withdrawal Risks

Kriptomat ensures the segregation of client assets from company funds, maintaining secure custody of assets. Regular due diligence is conducted on third-party custodians and liquidity providers.

Some crypto assets may be held with third-party liquidity providers who are subject to our due diligence procedures. In these cases, Kriptomat will obtain your explicit prior consent and provide detailed information about the arrangement and associated risks before transferring any assets to such providers. While subject to audits, these assets are under third-party control, and Kriptomat cannot guarantee equivalent security or accept liability for any resulting loss.

Legal and Jurisdictional Risks

While Kriptomat is regulated under Estonian and EU law, including MiCA, users must understand that local laws in their country of residence may impose additional obligations. These may include reporting obligations, tax treatments, or legal restrictions on crypto asset usage.

Users remain solely responsible for ensuring compliance with applicable local laws.

Fraud and Scam Warnings

Kriptomat is committed to fraud mitigation and user protection. We do not contact users by phone or through unofficial channels, and we do not employ brokers or agents. We will never ask you for your account credentials or instruct you to install any remote access software on your device.

Always verify links and communication channels. Never send funds or credentials to unverified addresses. For guidance, refer to our Fraud Awareness Note.

Service Availability

Kriptomat does not guarantee uninterrupted service. Periods of downtime or congestion may limit access to buying, selling, or transferring assets. Kriptomat shall not be held liable for such occurrences.

Final Disclaimer and Complaints

All users are encouraged to understand the risks involved and seek independent financial, legal, or tax advice when necessary. No information provided by Kriptomat constitutes investment or legal advice.

If you have questions or concerns regarding our services or wish to file a complaint, please consult our Complaints Handling Policy available on our website.