Disclosure Statement

Introduction

This Risk Disclosure Statement provides Clients with information about the risks associated with Virtual Assets generally and the Accepted Virtual Assets and Stablecoins accepted by Tungsten. Clients are strongly advised to read this Risk Disclosure Statement carefully before deciding to use any products and services offered by Tungsten.

The risks presented in this statement do not provide an exhaustive list and solely offer a high-level overview of the risks associated with the ownership of Virtual Assets and Stablecoins. The purpose of this statement is to highlight these risks, rather than delving into an exhaustive analysis of all potential risks tied to holding Virtual Assets and Stablecoins. Clients are encouraged to conduct their own evaluations concerning the appropriateness of holding Virtual Assets or Stablecoins, informed by their own research, investigations, experience, financial capabilities, and objectives.

Overview of General Risk Associated with Virtual Assets

This Risk Disclosure Statement addresses the risks that are associated with transacting in Virtual Assets below:

(i) Virtual Assets are not Legal Tender;
(ii) Loss of Value, Volatility and Uncertainty of Future Performance;
(iii) Market Forces;
(iv) Financial Crime and Cyber Attacks;
(v) Availability of Virtual Assets;(vi) Technology Risk;
(vii) Regulatory Risk.

Disclosures 

Risks Related to the Services, Virtual Assets, and Acceptd Virtual Assets and Stablescoins.

The potential for significant financial losses in the trading of virtual assets is substantial. Consequently, it is imperative that you thoroughly assess whether engaging in such trading aligns with your specific circumstances and financial capabilities. You should be aware of the following:

1. Virtual Assets are not Legal Tender

Virtual Assets lack central government backing and are not considered legal tender. The acceptance of a Virtual Asset as payment today does not guarantee its acceptance in the future, and there may be no binding obligation for those who currently accept it to continue doing so. Holders of Virtual Assets place their trust in a digital, decentralised, and partially anonymous system, which relies on peer-to-peer networking and cryptography to uphold its integrity. Neither merchants nor individuals are obligated to accept Virtual Assets as a means of payment in the future.

2. Loss of Value, Volatility and Uncertainty of Future Performance

The pricing of Virtual Assets may lack robust foundational underpinnings, giving rise to the potential for price volatility and unpredictability when compared to fiat currencies. Historically, Virtual Assets have exhibited significantly higher price volatility than fiat currencies, often with no or limited tangible assets serving as a basis for price determination. This absence of a solid reference can lead to irrational and extreme price fluctuations, and in some cases, a Virtual Asset may even lose its entire value, as the valuation process remains speculative and uncertain.

Given these heightened risks, it is advisable for clients to consider investing in Virtual Assets only if they are fully prepared to bear the risk of losing their entire investment. Clients who are not familiar with Virtual Assets are strongly encouraged to refrain from transactions and seek professional guidance when deemed necessary.

3. Market Forces

Engaging in Virtual Asset trading can be vulnerable to irrational market dynamics, including speculative bubbles, manipulation, fraudulent activities, and scams.

4. Financial Crime and Cyber Attacks

Financial crimes and cyber-attacks pose a higher risk within the Virtual Asset ecosystem due to its digital and decentralised nature. For instance, a 51% attack, carried out by an individual or group controlling over 50% of the network’s mining hash rate, can disrupt new block creation, manipulate payment histories, and compromise funds.

Clients are susceptible to malware, counterfeit addresses, and various cyber threats associated with holding Virtual Assets. It’s crucial to exercise caution with passwords and verify addresses and URLs.

Private keys may be vulnerable to hacking, theft, or loss. Ownership of the relevant Virtual Asset hinges on the possession of the private key. In many cases, there is no mechanism for recovering lost or stolen Virtual Assets, and transactions are often irreversible. Sending Virtual Assets to the wrong address, whether through incorrect entry or other means, can result in permanent loss, with little to no chance of recovery. Losses incurred from fraudulent or accidental transactions may not be retrievable.

Furthermore, Virtual Assets can be exploited for illicit purposes, such as money laundering, financing terrorism, or other unlawful activities.

5. Availability of Virtual Assets

Approval from the FSRA is mandatory for the inclusion of Virtual Asset on Tungsten’s platform. The FSRA retains the authority to revoke this approval at its discretion in accordance with its supervisory responsibilities. Delisting of any Virtual Asset can occur without prior notification or consent.

Likewise, any Virtual Asset resulting from a hard fork or comparable alterations to a Virtual Asset’s protocols will secure prior approval from the FSRA before becoming accessible on the Platform.

6. Technology Risk

The foundation of the software protocols governing Virtual Assets are typically open source, indicating that Tungsten has no authority over their development and control. Furthermore, these software protocols are susceptible to abrupt and substantial alterations that can significantly influence the availability, usability, or value of a specific Virtual Asset.

These modifications might encompass events such as a “fork,” a “rollback,” or an “airdrop,” each of which has the potential to impact the value of the Virtual Asset. Virtual Assets heavily rely on emerging technologies, including distributed ledger technologies, for functions like anonymity, irreversible transactions, accidental transactions, transaction recording, and settlement.

Transactions involving Virtual Assets on the blockchain hinge on the proper operation of intricate software, which heightens the risk of interruptions or impediments in accessing or using Virtual Assets. Neglecting this aspect may result in clients being unable to access or utilise Virtual Assets.

7. Regulatory Risk

Numerous trading platforms and services related to Virtual Assets operate without comprehensive regulation, or they might be subject to limited regulatory oversight. Therefore, clients should exercise prudence in selecting their counterparties by conducting thorough due diligence. The regulatory landscape for Virtual Assets exhibits significant disparities between different jurisdictions, including variations between the ADGM and other regions within the UAE.

It’s important to note that any regulatory modifications or actions undertaken by the FSRA or non-ADGM regulatory authorities can potentially have adverse consequences on the utilisation, transfer, exchange, and value of Virtual Assets. Regulatory frameworks governing Virtual Assets can undergo sudden and frequent changes, contingent on the specific jurisdiction in question.

Furthermore, it’s crucial to recognize that the list of risks provided above is not exhaustive, and there may be additional unforeseeable risks. Subject to applicable legal requirements and the terms outlined in your agreement with us, we bear no responsibility for any losses, irrespective of their nature, arising from your use of our services.

Specific Risks Associated with Stablecoins

Tungsten exclusively serves as a custodian for Stablecoin operations and holds no role as an issuer, operator, manager, or beneficiary of any Stablecoin. Consequently, prior to engaging in any Stablecoin transactions or trading, it is advisable to thoroughly examine the project page for comprehensive insights and to remain informed about the specific terms and conditions set forth by the issuer of the respective Stablecoin.

Stablecoins are structured to maintain a 1:1 peg to fiat currency through collateralization. Nevertheless, it’s vital to note that Stablecoins do not fall under the umbrella of any deposit insurance protection scheme, and the existence of fiat currency reserves does not provide an absolute assurance of redemption. In scenarios of exceptionally high demand, there is the potential that the reserves might prove insufficient or temporarily inaccessible for redemption. Additionally, market volatility spikes can result in instances where the price of a Stablecoin diverges from the underlying fiat currency.

Alterations in regulations or regulatory measures taken by the FSRA or regulatory authorities outside the ADGM jurisdiction could potentially have adverse repercussions on the utilisation, transfer, exchange, and valuation of Virtual Assets. The regulatory framework surrounding Virtual Assets may undergo sudden and recurrent modifications, contingent on the specific jurisdiction in question.

It is important to acknowledge that the list of risks mentioned above is not exhaustive, and there might also be unforeseeable risks. In compliance with applicable legal provisions and the terms delineated in your agreement with us, we bear no responsibility for any losses, regardless of their nature, stemming from your utilisation of our services.

USDC Specific Risks 

Introduced in 2018, USD Coin (USDC) ranks among the prominent fiat-backed stablecoins. USDC is a centralised token issued by the Centre Consortium, initially established by Coinbase and Circle Financial. Each USDC is specifically structured to be backed by USD collateral, safeguarded in reserve by reputable, regulated financial institutions in the United States. Circle willingly discloses monthly financial reports, outlining the assets held in reserve.

Nonetheless, it’s essential to understand that USDC does not fall under the umbrella of any deposit insurance protection scheme. The presence of a USD reserve does not guarantee redemption. In scenarios of exceptionally high demand, there is the potential that the reserves may prove inadequate or temporarily inaccessible for redemption.

Given that USDC aims to provide price stability, secured by assets denominated in USD or their equivalent, it’s crucial to acknowledge that changes in the use, transfer, redemption, or potential tax implications for USDC holders may occur due to evolving control and regulatory rules governing such currencies or assets.

Decisions regarding the support and execution of USDC transactions in specific countries, as well as the eligibility and appropriateness of individuals engaging in these transactions, rest with the Centre Consortium. This entails a potential risk of the UAE being excluded from supported countries, and certain users may encounter transaction restrictions. In such instances, Tungsten may cease to accept, remove, or suspend USDC for transactions.

For additional information or assistance, please do not hesitate to reach out to our Customer Support team via email at support@tungsten.ae.

Custody Disclosure Statement

Safe Custody Provisions

1. While your Accepted Virtual Assets are under Tungsten’s custodial care, you will benefit from the safeguards granted by the Safe Custody Rules found in COBS Chapter 15, in accordance with the FSRA Rules.
2. Tungsten will securely receive and store any Accepted Virtual Assets provided by Clients, with Tungsten serving as the exclusive custodian of the private keys.
3. Tungsten does not offer interest on the Accepted Virtual Assets that are maintained on your behalf.
4. Tungsten will retain the Accepted Virtual Assets of Clients within the ADGM jurisdiction. If Tungsten intends to store Clients’ Accepted Virtual Assets outside the ADGM, Tungsten will notify Clients in advance via email. This notification will include information about the storage location, and if relevant, any distinctions in market practices, insolvency regulations, or legal frameworks in that jurisdiction compared to those of the ADGM.
5. Your Accepted Virtual Assets will be maintained separately from the Accepted Virtual Assets owned by Tungsten.
6. Your Accepted Virtual Assets will not be commingled with the assets of other clients, ensuring their physical segregation from those of other clients.
7. Tungsten will perform a daily reconciliation of the Accepted Virtual Assets it holds on your behalf.
8. If a default event occurs or if, at any point, Tungsten, at its sole discretion, determines that you have not fulfilled your obligations to Tungsten (or Tungsten reasonably anticipates that you may not be able or willing to fulfil them in the future), Tungsten may promptly suspend your access to the Custody Service.