Digital Asset & OTC Risk Disclosure - FinchTrade AG
This Risk Disclosure applies exclusively to OTC digital-asset exchange and liquidity services provided by FinchTrade AG.
The purpose of this Risk Disclosure is to inform you that Transactions involving Digital Assets may involve substantial risks and may result in significant financial loss. You should not enter into any Transaction with FinchTrade AG unless you understand the nature of the Transaction, the relevant Digital Assets and the extent of your exposure to risk.
You are responsible for determining whether a Transaction is appropriate for you having regard to your business, financial circumstances, risk appetite, legal position and any other relevant considerations.
This Risk Disclosure forms an integral part of the General Terms and Conditions for digital asset services entered into with FinchTrade AG (the Terms). Capitalised terms used but not defined in this Risk Disclosure have the meanings given to them in the Terms.
The risks described below are not exhaustive.
1. No Investment, Financial, Legal or Tax Advice
FinchTrade AG does not provide investment, portfolio management, financial, legal or tax advice in connection with any Transaction.
FinchTrade AG does not make personal recommendations regarding:
- whether you should purchase, sell or hold a particular Digital Asset;
- whether a particular Transaction is suitable or appropriate for you;
- the composition of any portfolio;
- your trading strategy;
- the legal or regulatory treatment of a Transaction; or
- the tax consequences of any Transaction.
Any information provided by FinchTrade AG concerning prices, markets, Digital Assets, transaction mechanics or settlement arrangements is provided for informational or transactional purposes only and should not be treated as advice or a recommendation.
You must make your own independent assessment of each Transaction and obtain such professional advice as you consider necessary.
2. Principal-to-Principal Transactions
Unless otherwise expressly agreed in writing, you enter into each Transaction as principal and for your own account, and not as agent, trustee, nominee or intermediary for an undisclosed third party.
FinchTrade AG will treat you as its contractual counterparty in respect of each Transaction.
If you act for or on behalf of another person without having disclosed and agreed such arrangement with FinchTrade AG in advance, FinchTrade AG may refuse to enter into a Transaction, suspend services or terminate the contractual relationship in accordance with the Terms.
FinchTrade AG generally acts as principal in Transactions with its clients and may earn a spread, margin or other economic return from a Transaction irrespective of the outcome of that Transaction from the client's perspective.
3. OTC Market Risk
Transactions entered into with FinchTrade AG are generally conducted over-the-counter (OTC) and not through a centralised exchange order book.
OTC transactions may involve risks that differ from transactions executed on an exchange, including:
- the absence of a central market for competing executable prices;
- individually negotiated pricing;
- limited transparency regarding prices available from other market participants;
- limited ability to obtain an offsetting transaction on equivalent terms;
- reduced market liquidity for certain assets or transaction sizes; and
- increased execution and settlement risk during periods of market stress.
There may be no readily available market on which you can immediately reverse or offset a Transaction on the same or comparable economic terms.
You should understand the characteristics of the relevant OTC market before entering into a Transaction.
4. Binding Transaction and Settlement Risk
Once a Transaction has been agreed and becomes binding under the Terms, subsequent movements in the market value of the relevant assets do not generally affect the parties' obligation to settle the Transaction.
The market value of a Digital Asset may move materially between trade execution and settlement.
You may therefore be required to settle a Transaction at an agreed price that has become less favourable than the prevailing market price at the time of settlement.
Delays in payment, blockchain confirmation, banking systems, compliance review or other settlement processes may increase this risk.
5. Market and Volatility Risk
Digital Assets may experience substantial and rapid price fluctuations.
The market value of a Digital Asset may be affected by factors including:
- changes in supply and demand;
- market sentiment;
- liquidity conditions;
- macroeconomic developments;
- regulatory announcements;
- technological developments;
- actions of issuers, developers or market participants;
- security incidents;
- exchange or infrastructure failures; and
- broader developments in digital-asset markets.
A Digital Asset may lose a substantial part or all of its value.
Past prices, historical liquidity or previous market behaviour are not reliable indicators of future performance.
6. Liquidity Risk
Certain Digital Assets or transaction sizes may be difficult to trade without materially affecting the market price.
Liquidity may deteriorate rapidly, particularly during periods of:
- extreme volatility;
- market disruption;
- regulatory uncertainty;
- cybersecurity incidents;
- issuer or protocol events; or
- significant market-wide selling or buying pressure.
FinchTrade AG may not always be able or willing to provide a quote for a particular Digital Asset, transaction size or settlement timeframe.
An executable price may differ materially from prices displayed by exchanges, market-data providers or other counterparties.
7. Price and Execution Risk
Prices quoted by FinchTrade AG are individually determined for the relevant Transaction and may reflect, among other things:
- prevailing market prices;
- available liquidity;
- transaction size;
- market volatility;
- hedging costs;
- settlement method;
- counterparty risk;
- operational costs; and
- FinchTrade AG's commercial margin.
There is no assurance that a price quoted by FinchTrade AG will be the best price available in the market.
Prices displayed on exchanges or market-data platforms may not represent prices at which the relevant transaction size can actually be executed.
FinchTrade AG may earn a profit or spread from a Transaction.
8. Counterparty and Credit Risk
When entering into a Transaction with FinchTrade AG, you are exposed to FinchTrade AG as your contractual counterparty.
Where FinchTrade AG is required to deliver fiat currency, Digital Assets or other value to you, you bear the risk that FinchTrade AG may fail to perform its obligations due to insolvency, operational failure, legal restrictions or other circumstances.
OTC Transactions are generally not cleared through a central counterparty.
Accordingly, you do not benefit from the credit protections that may exist in certain centrally cleared markets.
9. Foreign Exchange Risk
Where a Transaction involves fiat currencies or settlement in a currency different from your functional or reporting currency, you may be exposed to foreign exchange risk.
Exchange rates may fluctuate materially between trade execution, settlement and any subsequent conversion.
Governmental or monetary authorities may also impose exchange controls, capital controls or other restrictions that affect the availability, transferability or value of fiat currencies.
10. Blockchain and Network Risk
Transactions involving Digital Assets depend on blockchain or distributed-ledger networks that are outside the control of FinchTrade AG.
Such networks may experience:
- congestion;
- transaction delays;
- temporary or permanent outages;
- forks;
- protocol changes;
- consensus failures;
- validator or miner disruptions;
- technical vulnerabilities; or
- other events that affect transaction processing or settlement.
FinchTrade AG does not control the operation, governance or development of public blockchain networks.
Network events may delay or prevent settlement and may affect the value, functionality or transferability of a Digital Asset.
11. Digital Asset Transfer Risk
Transfers of Digital Assets are generally irreversible once confirmed on the relevant blockchain.
An incorrect:
- wallet address;
- blockchain network;
- destination tag;
- memo;
- token contract;
- transfer instruction; or
- other settlement information
may result in delay or permanent loss of Digital Assets.
You are responsible for ensuring that any wallet address or other transfer information supplied to FinchTrade AG is accurate, valid and compatible with the relevant Digital Asset and network.
FinchTrade AG may not be able to recover Digital Assets transferred to an incorrect or unsupported address or network.
12. Wallet, Custody and Private-Key Risk
Digital Assets are controlled through cryptographic keys and wallet infrastructure.
Loss, compromise, theft or unauthorised use of private keys, credentials or wallet access may result in permanent loss of Digital Assets.
Where you use your own wallet or third-party custody provider, FinchTrade AG is not responsible for the security or operation of that wallet or custody arrangement unless otherwise expressly agreed in writing.
You are responsible for maintaining appropriate security over your own systems, accounts, credentials and wallet infrastructure.
13. Technology and Operational Risk
Transactions may be affected by failures or disruptions involving:
- FinchTrade AG's systems;
- communication networks;
- API connections;
- blockchain infrastructure;
- banking and payment systems;
- liquidity providers;
- custodians;
- wallet infrastructure;
- cloud or technology service providers; or
- other third parties involved in execution or settlement.
Operational incidents may result in delays, failed transactions, temporary suspension of services or inability to execute or settle Transactions.
No technology infrastructure can be guaranteed to operate without interruption or error.
14. Cybersecurity Risk
Digital-asset markets and infrastructure may be targeted by cyberattacks, fraud, phishing, malware, ransomware, credential theft or other malicious activity.
A cybersecurity incident affecting FinchTrade AG, a client, a blockchain network, an exchange, a liquidity provider, a bank, a custodian or another third party may materially affect the execution or settlement of Transactions.
FinchTrade AG implements security measures designed to reduce such risks but cannot eliminate them.
15. Stablecoin Risk
Where a Transaction involves a stablecoin, additional risks may arise in relation to:
- the financial condition of the issuer;
- the quality, composition or availability of reserves;
- redemption arrangements;
- the legal rights of token holders;
- banking or custody counterparties used by the issuer;
- regulatory action;
- market liquidity; and
- the stablecoin's ability to maintain its intended reference value.
A stablecoin may trade above or below its intended reference value and, in extreme circumstances, may permanently lose its peg or redemption value.
FinchTrade AG does not guarantee the solvency, reserves, redemption arrangements or price stability of any stablecoin issuer.
16. Token and Smart-Contract Risk
Digital Assets may depend on smart contracts or other software that may contain:
- coding errors;
- vulnerabilities;
- design flaws;
- administrative controls;
- upgrade mechanisms;
- governance risks; or
- other technical limitations.
An exploit, malfunction, protocol upgrade or governance decision may adversely affect the value, functionality or transferability of a Digital Asset.
Certain Digital Assets may also be subject to issuer, protocol or governance actions that FinchTrade AG cannot control.
17. Forks, Airdrops and Protocol Changes
Blockchain networks may undergo forks, upgrades or other protocol changes.
FinchTrade AG may determine, in accordance with its internal policies and the Terms, whether and how it will support:
- a forked asset;
- an airdrop;
- a token migration;
- a protocol upgrade; or
- another blockchain event.
FinchTrade AG is not obliged to support every resulting asset, fork, distribution or protocol change.
Such events may affect the timing of settlement, availability of services or value of the relevant Digital Asset.
18. Legal and Regulatory Risk
The legal and regulatory treatment of Digital Assets and related activities continues to evolve.
Changes in law, regulation, regulatory interpretation, sanctions, taxation or enforcement practice may:
- affect the legality or availability of a Digital Asset;
- restrict trading or transfers;
- affect liquidity or market value;
- impose additional compliance requirements;
- require FinchTrade AG to restrict certain clients, jurisdictions or transactions;
- require FinchTrade AG to suspend or discontinue support for a Digital Asset; or
- otherwise affect your ability to enter into or settle Transactions.
FinchTrade AG does not guarantee that a Digital Asset will continue to be supported or remain legally available.
19. Sanctions and AML/CFT Risk
Transactions involving Digital Assets may be subject to sanctions, anti-money laundering, counter-terrorist financing and other financial-crime controls.
FinchTrade AG may:
- request additional information;
- delay settlement;
- reject or suspend a Transaction;
- freeze or restrict activity where legally required;
- terminate a client relationship; or
- make reports or disclosures to competent authorities,
where required or permitted by applicable law or FinchTrade AG's compliance obligations.
Such actions may occur without prior notice where legally required.
20. Regulatory Status and Absence of Investor Protection
FinchTrade AG is a Swiss financial intermediary affiliated with VQF, a self-regulatory organisation recognised by the Swiss Financial Market Supervisory Authority (FINMA).
FinchTrade AG is supervised by VQF for compliance with applicable Swiss anti-money laundering requirements.
FinchTrade AG is not prudentially supervised by FINMA as a bank, securities firm or other FINMA-licensed financial institution.
Digital Assets or funds involved in Transactions with FinchTrade AG are not protected solely by virtue of FinchTrade AG's VQF membership by any Swiss deposit insurance or investor compensation scheme applicable to banks or securities firms.
You should understand the regulatory status of FinchTrade AG before entering into a Transaction.
21. Conflicts of Interest
FinchTrade AG acts as principal in Transactions with its clients unless otherwise expressly agreed.
Accordingly, FinchTrade AG's economic interests may differ from yours.
FinchTrade AG and its Affiliates may:
- enter into transactions with other clients or counterparties;
- hold positions in Digital Assets;
- hedge exposure arising from client Transactions;
- enter into transactions that are economically opposite to your position;
- obtain liquidity from third parties;
- receive spreads, margins, fees or other economic benefits; or
- conduct proprietary transactions.
The fact that FinchTrade AG or an Affiliate enters into such transactions does not create a fiduciary or advisory duty to you.
Unless otherwise required by applicable law or expressly agreed in writing, FinchTrade AG is not required to disclose its hedging transactions, positions, margins or profits relating to a particular Transaction.
22. Third-Party Risk
FinchTrade AG may rely on third parties in connection with execution, settlement, liquidity, banking, custody, blockchain analytics, technology or other operational functions.
The failure, insolvency, suspension, cyber incident or operational disruption of a third party may affect FinchTrade AG's ability to execute or settle a Transaction.
FinchTrade AG may need to delay, modify or cancel certain operational steps where a third-party service becomes unavailable or where required for legal, compliance or risk reasons.
23. Tax Risk
Transactions involving Digital Assets may have tax consequences.
The tax treatment of Digital Assets and transactions involving them may vary materially between jurisdictions and may change over time.
You are solely responsible for determining the tax consequences of your Transactions and for obtaining independent tax advice where appropriate.
FinchTrade AG does not provide tax advice.
24. No Fiduciary Relationship
Neither FinchTrade AG nor any Affiliate acts as your fiduciary, investment adviser, portfolio manager or agent in connection with a Transaction unless expressly agreed otherwise in writing.
The relationship between you and FinchTrade AG is a contractual counterparty relationship.
You remain responsible for your own commercial and financial decisions.
25. No Guarantee of Outcome
No communication, quotation, market information, transaction confirmation or other information provided by FinchTrade AG or an Affiliate constitutes:
- a guarantee of profit;
- a guarantee against loss;
- an assurance regarding future prices;
- an assurance regarding liquidity; or
- an assurance regarding the future value or availability of any Digital Asset.
26. Client Acknowledgements
By entering into a Transaction with FinchTrade AG, you acknowledge and agree that:
- you have read and understood this Risk Disclosure;
- you understand the nature and risks of the Transactions you enter into;
- you have made your own independent decision to enter into each Transaction;
- you have considered your financial circumstances, business requirements and risk tolerance;
- you have obtained such legal, tax, accounting, regulatory or other professional advice as you consider necessary;
- neither FinchTrade AG nor any Affiliate is acting as your fiduciary or adviser in relation to a Transaction;
- you are not relying on any communication from FinchTrade AG or an Affiliate as investment advice or a recommendation;
- you understand that Digital Assets may lose substantial or all of their value;
- you understand that execution, settlement and transfer of Digital Assets may be affected by technological, operational, liquidity, regulatory and third-party risks;
- you understand the potential legal and tax consequences of Transactions in the jurisdictions relevant to you; and
- you accept that this Risk Disclosure cannot identify or explain every possible risk associated with Digital Assets or OTC Transactions.
27. Non-Exhaustive Disclosure
This Risk Disclosure does not purport to disclose all risks associated with Digital Assets, OTC markets or Transactions with FinchTrade AG.
Additional risks may arise depending on:
- the Digital Asset;
- transaction structure;
- settlement method;
- jurisdiction;
- market conditions;
- regulatory developments; and
- your own circumstances.
You should carefully evaluate each Transaction before entering into it.