Risk Disclosure Statement
IMPORTANT
Trading in Virtual Assets and using the Services involve risks, some of which are set out below. These risks, and additional risks arising either now or in the future, could result in the loss, failure or destruction of your assets, inability to receive any benefits available to you, other losses and termination of our Services.
You must consider carefully whether the risks set out below, as well as all other applicable risks, are acceptable to you prior to any Virtual Asset Transaction.
You must seek professional advice regarding your particular situation before trading in the Virtual Assets or using the Services.
THE RISK OF LOSS IN TRANSACTIONS INVOLVING VIRTUAL ASSETS CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRANSACTIONS ARE SUITABLE FOR YOU IN LIGHT OF YOUR INVESTMENT OBJECTIVES, FINANCIAL CIRCUMSTANCES, YOUR TOLERANCE TO RISKS AND YOUR INVESTMENT EXPERIENCE. YOU SHOULD BE CAPABLE OF BEARING A FULL LOSS OF THE AMOUNTS INVESTED AS A RESULT OF OR IN CONNECTION WITH ANY VIRTUAL ASSET TRANSACTION AND ANY ADDITIONAL LOSS OVER AND ABOVE THE INITIAL AMOUNTS TRADED OR INVESTED THAT MAY BECOME DUE AND OWING BY YOU. IN CONSIDERING WHETHER TO TRADE OR INVEST, YOU SHOULD INFORM YOURSELF AND BE AWARE OF THE RISKS GENERALLY, AND IN PARTICULAR SHOULD NOTE THE FOLLOWING SPECIFIC RISK FACTORS WHICH MAY APPLY TO ANY GIVEN VIRTUAL ASSET TRANSACTION.
Unless otherwise expressly defined herein, the terms defined in the Client Terms and Conditions shall have the same meanings whenever used in this Risk Disclosure Statement.
TRANSACTION AND SERVICES RISKS
Risks of Virtual Asset trading
The prices of Virtual Assets fluctuate, sometimes dramatically. The price of a Virtual Asset may move up or down, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling Virtual Assets.
Nature of Virtual Assets
The Virtual Assets are not legal tender. They may not be backed by physical assets, and are not backed or guaranteed by the government and authorities. They may not have intrinsic value. Some of the Virtual Assets may not circulate freely or widely, and may not be listed on any secondary markets.
Virtual Assets are highly risky. They may or may not be Securities. You should exercise caution in relation to the trading of Virtual Assets, and Virtual Assets themselves.
Transactions involving Virtual Assets are irrevocable or irreversible. The nature of Virtual Assets expose them to an increased risk of fraud or cyber-attacks. Losses due to fraudulent or accidental transactions may not be recoverable. Once a transaction has been verified and recorded on a blockchain, loss or stolen Virtual Assets generally will not be reversible.
The nature of Virtual Assets means that any technological difficulties experienced by us may prevent you from accessing your Virtual Assets.
Reliance on distributed ledger technology
Virtual Assets rely on various types of distributed ledger technology. Some of this technology is open source software that is built upon experimental technology, namely blockchain. Risks arising from relying on such technology include the existence of technical flaws in the technology, targeting by malicious persons, majority-mining, consensus-based or other mining attacks, changes in the consensus protocol or algorithms, decreased community or miner support, rapid fluctuations in value of relevant Virtual Assets, the existence or development of competing networks, platforms and assets, flaws in the scripting language, disputes between developers, miners and/or users and regulatory action.
Virtual Assets may be complex products
Virtual Assets may be complex products by virtue that the terms, features and/or risk are not understood due to the complex structure, novelty and reliance on technological features.
Volatility of Virtual Assets
The value of the Virtual Assets may fluctuate significantly over a short period of time. The volatile and unpredictable fluctuations in price may result in significant losses over a short period of time.
Any Virtual Asset may decrease in value or lose all of its value due to various factors including discovery of wrongful conduct, market manipulation, change to the nature or properties of the Virtual Asset, governmental or regulatory activity, legislative changes, suspension or cessation of support for a Virtual Assets or other exchanges or service providers, public opinions, or other factors outside of our control. Technical advancements, as well as broader economic and political factors, may cause the value of Virtual Assets to change significantly over a short period of time.
Market, liquidity and conversion risk
Where Virtual Asset Transactions are denominated in particular Virtual Assets or Fiat Currencies other than your primary reference asset, or where you convert Virtual Assets upon carrying out a Virtual Asset Transaction, there is a risk that if the exchange markets move against you, then upon maturity or any earlier dealing the net proceeds may be significantly less than the initial amount in your primary reference asset, and any income or gains may be entirely negated.
The extreme volatility and unpredictability of the price of a Virtual Asset relative to fiat currencies may result in a total loss of the investment over a short period of time.
The value of a particular Virtual Asset may decline, or be completely and permanent lost should the market for that Virtual Asset disappear. There is no assurance that a market for a particular Virtual Asset will continue to exist in the future. This is because the value of a Virtual Asset may be derived, among other things, from the continued willingness of market participants to exchange that Virtual Asset.
There is the possibility for you to experience losses due to the inability to sell or convert assets into a preferred alternative asset immediately or in instances where conversion is possible but at a loss. Such liquidity risk in an asset may be caused by the absence of buyers, limited buy/sell activity or underdeveloped secondary markets. There is no assurance that a person who accepts a Virtual Asset as payment, will continue to do so in the future.
You may also suffer loss as a result of depreciation of the value of the currency paid as a result of foreign exchange controls imposed by the country issuing the foreign currency. Repayment or payment of amounts due to you may be delayed or prevented by exchange controls or other actions imposed by governmental or regulatory bodies over currencies which they control or regulate.
Not a bank deposit
Without limiting clause 4.1(d) of Part 1, any Fiat Currencies or Virtual Assets held by us and/or the Associated Entity are not held as “deposits” within the meaning of the Banking Ordinance (Cap. 155 of the Laws of Hong Kong), nor as any other regulated product or service under Applicable Law. Without limitation, neither TWTL nor the Associated Entity is regulated by the Hong Kong Monetary Authority.
No right under statutory protection schemes
You should be aware that:
- any Virtual Asset Transaction in respect of Virtual Assets is not subject to a right to claim under the Investor Compensation Fund established under the SFO (irrespective of the nature of the tokens); and
- any Virtual Assets or Fiat Currency held in an Account are not protected deposits, and are not protected by the Deposit Protection Scheme in Hong Kong.
This means that Virtual Asset Transactions and Virtual Assets may have reduced level or type of protection compared to other products and asset classes afforded by the laws of Hong Kong.
Commissions and fees
Before conducting any Virtual Asset Transaction, you should obtain details of all commissions, fees and Costs for which you will be liable. If any of the fees and Costs are not clear to you, you should request the fee and Costs that will be applicable in specific monetary terms before entering into a Virtual Asset Transaction. Depending on the Services provided, such fees and Costs will be set out in the relevant Confirmation, in writing via Agreed Communication Method or otherwise recorded in your Account.
The commissions, fees and Costs you pay will vary depending on a variety of factors, including the nature of your relationship with us in relation to the relevant Services, the transaction size, complexity and type of asset. Any fees or Costs applied may include execution charges (including commissions, commission equivalents, markups, markdowns and dealer spreads) and/or administrative costs.
For the above purpose,
“commission equivalents” means the amount charged by TWTL for purchasing or selling Virtual Assets in certain riskless principal transactions (that is, transactions in which TWTL, after having received an order to buy or sell from you, purchases or sells the Virtual Assets from another person to offset the Virtual Asset Transaction TWTL entered into with you);
a “markup” or “markdown” is the difference between the price charged to you and the prevailing market price, such difference being included in the quote or the price of the Virtual Assets; and
the “spread” means the difference between the current purchase or bid price and the current ask or offer price. Such spread is also included in the quote or the price of the Virtual Assets, which may narrow or widen in response to the supply and demand levels of the Virtual Assets.
Risks of assets received or held outside Hong Kong
Virtual Assets and Fiat Currency received or held by us and/or the Associated Entity outside Hong Kong are subject to Applicable Laws of the relevant overseas jurisdictions, which may be different from the SFO and the rules made thereunder. Consequently, such assets may not enjoy the same protection as that conferred on some of the assets received or held in Hong Kong.
Risks relating to Authorised Persons
There are substantial risks in allowing another person to trade or operate an Account, and it is possible that Instructions could be given by persons who are not properly authorised. You accept all of the risks of such an operation and irrevocably release us from all liabilities arising out of or in connection with such Instructions.
Suspension of Virtual Asset Transactions, Airdrops, Forks & Network Events
It may be difficult or impossible to liquidate a position in the Virtual Assets under certain circumstances. Certain Airdrops, Forks or Network Events may occur rapidly and affect our ability to conduct a Virtual Asset Transaction. Information relating to such events may be difficult to ascertain ahead of time and may be subject to limited oversight by any third party who is capable of intervening to stabilise the network.
CYBERSECURITY AND TECHNOLOGY – RELATED RISKS
Loss of private key is permanent and irreversible
You alone are responsible for securing your private key in respect of any address with respect to Virtual Assets not received nor held by us and/or the Associated Entity in an Account.
Losing control of your private key will permanently and irreversibly deny you access to your Virtual Assets. Neither we nor any other person will be able to retrieve or protect your Virtual Assets not held by us and/or the Associated Entity in an Account. Once lost, you will not be able to transfer your Virtual Asset to any other address or wallet. You will not be able to realise any value or utility that the Virtual Asset may hold now or in future.
Transactions irreversible
The nature of Virtual Asset Transactions is that they are irreversible. This means accidental or fraudulent transactions in respect of Virtual Assets may not be recoverable.
Forks and attacks
Virtual Assets may be subject to Forks or attacks on the security, integrity or operation of the networks, including Network Events. Such events may affect the features, functions, operation, use or other properties of any Virtual Asset, network or platform.
The events may also severely impact the price or value, function and/or the name of any Virtual Assets, or even result in the shutdown of the network or platform associated with the Virtual Asset. Such events may be beyond the control of TWTL, or to the extent TWTL has any ability to impact such event, TWTL’s decision or actions may not be in your interests.
Cyber-attacks and fraudulent activity
The technologic reliance of the Services on the internet exposes you to an increased risk of fraud or cyber-attack. Virtual Assets, your Account, any Service, Website or Trading Tool may be targeted by malicious persons who may attempt to steal Virtual Assets or Fiat Currency, or otherwise intervene in a Virtual Asset Transaction or any of our Services.
This includes (but is not limited to) interventions by way of:
- distributed denial of service;
- sybil attacks;
- phishing;
- social engineering;
- hacking;
- smurfing;
- malware;
- double spending;
- majority-mining, consensus-based or other mining attacks;
- misinformation campaigns;
- Forks; and
- spoofing.
Virtual Assets, your Account, any Service, Website or Trading Tool may also be vulnerable to exploitation of vulnerabilities in smart contracts and other code, as well as to human error.
A limited amount of your Virtual Assets may be stored in hot wallets (i.e. online environments which provide an interface with the internet), which can be prone to hacking or cyber-attacks. Cyber-attacks resulting in the hacking of Virtual Asset trading platforms and thefts of Virtual Assets are common. Victims may have difficulty recovering losses from hackers or trading platforms. This could result in significant loss and/or other impacts that may materially affect your interests.
The above events may affect the features, functions, operation, use, access or other properties of the Virtual Assets, your Account, the Website or our Services.
Targeting by malicious persons
Malicious entities may target you in an attempt to steal any asset you may hold, or to claim any asset that you may have purchased. This may involve unauthorised access to an Account, your private keys, your addresses, your passwords, your email or social media accounts, your log-in details or access method for the Account, as well as unauthorised access to your computer, smartphone and any other devices that you may use.
You alone are responsible for protecting yourself against such actions.
Cryptographic advancements
Developments in cryptographic technologies and techniques, including (but not limited to) the advancement of artificial intelligence and/or quantum computing, pose security risks to all cryptography-based systems including the Virtual Assets, your Account, any of our APIs, the Website or our Services. Applying these technologies and techniques to the Virtual Assets, an Account, any of our APIs, the Website or our Services may result in theft, loss, disappearance, destruction, devaluation or other compromises of the Virtual Assets, an Account, any of our APIs, the Website,
our Services or your data (as applicable).
Reliance on the internet and other technologies
Virtual Asset Transactions rely heavily on the internet and other technologies (including the Agreed Communication Methods). However, the public nature of the internet means that either parts of the internet or the entire internet may be unreliable or unavailable at any given time. Further, interruption, delay, corruption or loss of data, the loss of confidentiality in the transmission of data, or the transmission of malware may occur when transmitting data via the internet and/or other technologies. The result of the above may be that your Virtual Asset Transaction is not executed according to your Instructions, at the desired time, or not at all.
No authentication, verification or computer security technology is completely secure or safe.
The internet or other electronic media (including without limitation electronic devices, services of third party telecom service providers such as mobile phones or other handheld trading devices or interactive voice response systems) are an inherently unreliable form of communication, and such unreliability may be beyond the TWTL’s control.
Any information (including any document) transmitted, or communication or transactions made, over the internet or through other electronic media (including electronic devices, services of third party telecommunication service providers such as mobile phones or other handheld trading devices or interactive voice response systems) may be subject to interruption, transmission blackout, delayed transmission due to data volume, internet traffic, market volatility or incorrect data transmission (including incorrect price quotation) or stoppage of price data feed due to the public nature of the internet or other electronic media.
Risks relating to timing
A Virtual Asset Transaction is binding upon completion of the steps described in these Client Terms and Conditions. Following this, the Virtual Asset Transaction will not be reversed. There is a risk that the final binding Virtual Asset Transaction does not occur at the same time as Instructions are provided. Some Virtual Asset Transactions may be deemed to be executed only when recorded and confirmed by us, which may not necessarily be the time at which you initiate the transaction. You may suffer loss due to the fact that a Virtual Asset Transaction is not carried out at the desired time.
Unauthorised access
Unauthorised third parties may access or use your Account and effect Virtual Asset Transactions without your knowledge or authorisation, whether by obtaining control over another device or account used by you, or by other methods.
SPECIFIC BROKERAGE SERVICES RISKS
Off-exchange transactions
The Brokerage Services involve transactions that are conducted off-Exchange. Such transactions may involve increased risks since it may be difficult to find a counterparty and thus it may be hard to enter or exit positions at the desired price or at the Exchange trading price. Moreover, it may also be difficult to determine a fair price or assess exposure to risk. Off-Exchange transactions are not as transparent as transactions conducted on the Exchange.
Counterparty risk
You are subject to our counterparty risk under a Brokerage Services Transaction. You should evaluate the comparative credit risk and undertake appropriate due diligence on both us and the applicable product before undertaking any Brokerage Services Transaction.
GENERAL RISK STATEMENTS
Jurisdiction risks
Residents, tax residents or persons having a relevant connection with certain jurisdictions are excluded from carrying out Virtual Asset Transactions. Changes in your place of domicile or the Applicable Law may result in you violating any legal or regulatory requirements of your applicable jurisdiction.
You are responsible for ensuring that any Virtual Asset Transaction is, and remains lawful despite
changes to applicable laws, your residence and circumstances.
Virtual Asset issuer risks
We do not issue Virtual Assets. Virtual Assets are issued by third parties. You should read the applicable terms, information and risk disclosures provided by the applicable issuers carefully before entering into a Virtual Asset Transaction.
No offering documents, product terms or information provided by the applicable issuer have been subject to regulatory approval or scrutiny by any regulatory body, unless expressly stated otherwise. You should exercise caution in respect of any issuance or offer of such assets.
For any Virtual Assets that have been authorised by a regulator, authorisation does not imply any official recommendation or endorsement of the asset by the regulator, nor does it guarantee the commercial merits of the asset or its performance.
You should seek independent professional advice before making any investment decision.
Tax treatment and accounting
Some Virtual Asset Transactions may be subject to the tax laws and regulations in an applicable jurisdiction. The tax treatment and accounting of Virtual Assets is a largely untested area of law and practice that is subject to changes. Tax treatment of Virtual Assets may vary amongst jurisdictions. We may receive queries, notices, requests or summons from tax authorities and as a result may be required to furnish certain information about the Virtual Asset Transaction.
Among the accounting profession, there are no agreed standards and practices for how an auditor can perform assurance procedures to obtain sufficient audit evidence for the existence and ownership of the Virtual Assets, and ascertain the reasonableness of the valuations.
If you are unsure about the tax implications of your Virtual Asset Transactions, you should seek independent professional advice before carrying out a Virtual Asset Transaction.
Inflation Risk
Virtual Assets may, either because of the inherent design of the Virtual Asset or through Forks, Airdrops or Network Events, not be a fixed supply of assets. Where additional Virtual Assets are created, their price may decline due to inflationary effects of the increased amount of total Virtual Assets available.
Concentration risk
At any point in time, one or more persons may directly or indirectly control significant portions of the total supply of any particular Virtual Asset. Acting individually or in concert, these holders may have significant influence, and may be able to influence or cause Forks or Network Events which may have a detrimental effect on price, value or functionality of the Virtual Assets. Network Participants may make decisions that are not in your best interest as a holder of Virtual Assets.
Country risks
If an transaction is made in any Virtual Asset issued by a party subject to foreign laws or transactions made on markets in other jurisdictions, including markets formally linked to a domestic market, recovery of the sums invested and any profits or gains may be reduced, delayed or prevented by exchange controls, debt moratorium or other actions imposed by the government or other official bodies. Before you conduct any Virtual Asset Transactions you should satisfy yourself about any rules or laws relevant to those particular Virtual Asset Transactions.
Your local regulatory authority will be unable to compel the enforcement of the rules of regulatory authorities or markets in other jurisdictions where your transactions have been effected. You should obtain independent advice about the different types of redress available in both your home jurisdiction and other relevant jurisdictions before you start to trade. If your country of residence imposes restrictions on Virtual Asset Transactions, we may be required to discontinue your access to the Account, and may not be permitted to transfer Virtual Assets back to you or permit you to transfer Virtual Assets from the Account to yourself or others, until such time as the regulatory environment permits us to do so.
Legal and regulatory uncertainty
All Virtual Asset Transactions are potentially exposed to legal and regulatory risks. The legal and regulatory treatment of some of the Virtual Assets may change. Regulation of Virtual Assets is unsettled and rapidly changing. Legal and regulatory treatment varies according to the jurisdiction. The effect of regulatory and legal risk is that any Virtual Asset may decrease in value or lose all of its value due to legal or regulatory change. This may adversely affect the use, transfer, exchange and value of Virtual Assets. Virtual Assets are continuously evolving. A change in the protocol, governance or technical specifications of a Virtual Asset may affect its legal status and may subject the Virtual Asset to regulations not applicable to it previously.
A Virtual Asset may or may not be considered “property” under the law, and such legal uncertainty may affect the nature and enforceability of your interest in such a Virtual Asset.
We may cancel or modify your Virtual Asset Transaction, restrict or suspend the access to an Account or any of our Services to comply with Applicable Laws, FATF Guidelines or for other reasons specified in the Agreement.
We recommend that you obtain independent legal, tax and financial advice and that you continue to monitor the legal and regulatory position in respect of your Virtual Assets and Virtual Asset Transactions.
Conflicts of interest
We or other virtual asset trading service providers may be acting as agents for you as well as acting as principals against you. We or other relevant service providers may facilitate the initial distribution of Virtual Assets (such as, initial coin offerings), secondary market trading, or both, in manners similar to a traditional exchange, alternative trading system or securities broker. If these operations are not under the purview of any regulator, it would be difficult to detect, monitor and manage conflicts of interest.
