Crypto Risk Disclosures

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Effective:
August 10, 2021

You must evaluate your particular financial circumstances to determine whether investing in crypto-assets is appropriate for you. You should not invest funds in crypto-assets that you cannot afford to lose. The trading of crypto-assets can result in substantial losses, including most if not all of your investment. For that reason, you should not use funds that are earmarked for special purposes, such as retirement funds, debt repayment funds, amounts needed for emergency expenses, tuition or household expenses, or funds otherwise required by your lifestyle, to trade crypto-assets.

Unique Features of Crypto-assets.

Crypto-assets are digital instruments that are intended to function as a store of value or a medium of exchange. Although crypto-assets are often exchangeable for various fiat currencies, unlike fiat currencies, crypto-assets are not backed by any government or central bank and do not constitute legal tender. The price of crypto-assets is based on the agreement of the parties to a transaction, which may or may not is based on the market value of the crypto-assets at the time of the transaction.

Insurance

Accounts holding crypto-assets are not protected by any government insurance scheme coverage. Crypto-assets are also not covered by Deposit Insurance Commission programs, which cover fiat currency held in member banks. Existing insurance products are inadequate to cover potential losses if an exchange fails and/or digital wallets are hacked.4

Price Volatility

Crypto-assets derive their value from the markets in which they trade, and the markets for crypto-assets are global. The price of crypto-assets is based on the perceived value of the crypto-assets and is subject to changes in sentiment, which makes these products highly volatile and unpredictable. The fluctuations in crypto-assets prices are much greater than the price fluctuations of fiat currencies, which are also risky to trade. Certain crypto-assets have experienced daily price volatility of more than 20%, including sudden drops in price. If participants in a given crypto-assets market change their view about the value of a given cryptocurrency versus a fiat currency, the price of the crypto-assets can decline precipitously. It may be difficult to liquidate a position in crypto-assets at all, or, if possible, such liquidation may occur at a significant loss. It is possible that the market for a given crypto-asset could collapse altogether.

Valuation and Liquidity

Crypto-assets can be traded through privately negotiated transactions and through numerous cryptocurrency exchanges and intermediaries around the world, each with its own pricing mechanism and/or order book. Generally accepted auditing methods for crypto-assets do not exist and crypto-asset platforms do not have consistent methods for auditing their holdings, and some do not have audits at all. The lack of generally accepted auditing methods and a centralized pricing source pose 2 a variety of valuation challenges. In addition, dispersed liquidity may pose challenges for market participants trying to exit a position, particularly during periods of stress.

Regulatory Landscape

Different geographic locations have different rules, or oftentimes no rules, that apply to the use of cryptocurrencies. One or more jurisdictions may, in the future, adopt laws, regulations, or directives that affect cryptocurrency networks and their users. Changes in government regulation, such as the suspension or restriction of trading activity in a particular crypto-asset or tokens, may adversely affect your ability to trade and exchange your crypto-assets and may decrease the value of any crypto-asset in your account.

As compared to regulated markets, such as the global security markets, there are no uniform regulations governing trading or other mechanisms to prevent market manipulation or to normalize the cryptocurrency markets when they experience volatility issues. Unlike the laws, rules, and regulations governing securities markets, there are generally no laws, rules, or regulations that require anyone to continue to support a crypto-asset market, and there is no assurance that a person who accepts a virtual currency as payment today will continue to do so in the future.

Notwithstanding the foregoing, many countries are actively forming policies around compliance; also, some have accepted it as a currency.

Cryptocurrency Exchanges, Intermediaries, and Custodians.

The relatively new and rapidly evolving technology underlying cryptocurrencies introduces unique risks. For example, a unique private key is required to access, use or transfer a cryptocurrency on a blockchain or distributed ledger. The loss, theft, or destruction of a private key may result in irreversible loss.

Crypto-asset exchanges, as well as other intermediaries, custodians, and vendors used to facilitate cryptocurrency transactions, are relatively new and largely unregulated in both the United States and many foreign jurisdictions.

There are no standard capital requirements for crypto-asset platforms, nor are their guarantors in the event a crypto-asset exchange fails.

The opaque underlying spot market and lack of regulatory oversight create a risk that a crypto-asset exchange may not hold sufficient cryptocurrencies or other funds to satisfy its obligations, and that such a deficiency may not be easily identified or discovered.

In addition to a higher level of operational risk than regulated futures or securities exchanges, crypto-asset exchanges can experience volatile market movements, flash crashes, fraud, various forms of market manipulation, theft, transaction processing delays, and other cybersecurity risks.

Trading in crypto-assets may be halted by the various trading venues due to unusual trading activity, outages, or 3 other problems with a crypto-asset platform.

If we or our partners experience such technical difficulties, those difficulties could prevent you from accessing the crypto-asset in your ComiBlock Crypto account. ComiBlock may not have sufficient financial coverage through bonds, insurance, or other products to repay your losses.

Transaction Fees

Many crypto-assets allow market participants to offer miners (i.e., parties that process transactions and record them on a blockchain or distributed ledger) the ability to earn a fee. While not mandatory, a fee is generally necessary to ensure that a transaction is promptly recorded on a blockchain or distributed ledger. The amounts of these fees are subject to market forces, and it is possible that the fees could increase substantially during a period of stress. In addition, crypto-assets exchanges, wallet providers, and other custodians may charge relatively high fees as compared to custodians in many other financial markets.

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