Risk Disclosure Statement
Updated as at 13 July 2020
2. It is extremely important that Client read this statement carefully and understand its contents, You should consider any additional risks contained in the agreement and/ or product and country annexes. Please contact your own independent tax, legal, financial and other advice before signing the agreement.
3. Before deciding to use any of HKSTOX’s services or enter into any Transaction, Client must consider the risks inherent in such services or Transactions, the underlying assets (including any digital representation of value that is not fiat currency and that can be transferred, stored or traded electronically, hereinafter referred to as "Virtual Assets") or products insofar as they relate to them, the extent of the financial and economic risk to which they are exposed to as a result of any Transaction, and tax, regulatory and accounting treatment arising from any Transaction. Additionally, Client should carefully read all relevant documentation, including the Agreement, and any applicable Country or Product Annexes (together with any terms sheets, offering documents, white papers, or prospectuses that those documents may refer to), prior to taking any action.
4. Nothing in the Client Agreement or this Statement constitutes legal, investment or financial advice based upon any Client’s circumstances, nor is it a recommendation to participate in any of the services or an endorsement or recommendation of any of the products available. Where the Client is unclear as to the meaning, effect or consequences of any of the disclosures, disclaimers or warnings in the Agreement or the Statement, they are strongly advised to seek independent legal and financial advice before entering into the Agreement or using any of the services.
5. 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 Transaction entered into with HKSTOX and any additional loss over and above the initial amounts 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 Transaction. If you are not sure that the Transaction is suitable for you, you should obtain independent legal, tax or financial advice. The greater risk profile and other characteristics of Virtual Assets mean that they are markets more suited to professional and other sophisticated investors, and investors who have experience in, and knowledge of, Virtual Asset markets.
6. Transaction and Services Risks
6.1 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. 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 generally a high-risk asset class. They may or may not be traditional securities that carry governance and/or voting rights. You should exercise caution in relation to the trading of Virtual Assets, and Virtual Assets themselves. Transactions involving Virtual Assets are irrevocable. Lost or stolen Virtual Assets may be irretrievable. Once a transaction has been verified and recorded on a blockchain, loss or stolen Virtual Assets generally will not be reversible.
6.2 Assets not Held on Deposit: Any assets transferred to HKSTOX Finance Limited, the only custodian arranged by the HKSTOX, are not held as ‘deposits’ within the meaning of the Banking Ordinance (Cap. 155). Any assets transferred to HKSTOX Finance Limited in respect of the account are transferred to HKSTOX on a title transfer and proprietary basis, free from any encumbrance for the sole purpose of entering into Transactions and related activities in respect of the Virtual Asset services (including the satisfaction of certain fees, costs and charges). HKSTOX is not regulated by the Hong Kong Monetary Authority, and any asset transferred to HKSTOX Finance Limited and/or held in HKSTOX Finance Limited’s accounts are not protected deposits, and not protected by the Deposit Protection Scheme in Hong Kong. Neither HKSTOX’s activities, nor Virtual Assets are subject to specific regulation or supervision of a Hong Kong regulatory authority. In addition, any transactions arising from HKSTOX Limited will not be protected by the Securities and Futures Ordinance (Investor Compensation Fund). Customers are requested to decide whether they should use the services of HKSTOX Limited.
6.3 Commissions and Fees: Before conducting any Transaction, Client should obtain details of all commissions, fees and other charges for which the Client will be liable. If any charges are not expressed in monetary terms (e.g. as a percentage of transaction value), the Client should request the fees and/or costs that will be applicable in specific monetary terms prior to entering into a Transaction.
6.4 Suspensions of Trading / Network Events: Under certain conditions it may be difficult or impossible to liquidate a position in Virtual Assets. Certain Network Events (including total failure of a network) may occur rapidly and affect the ability of holders of Virtual Assets from conducting transactions. Information relating to these Network 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.
6.5 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.
7. Cyber Security Risks
7.1 Loss of Private Key(s) is Permanent and Irreversible: You alone are responsible for securing your private key in respect of any address. 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 Asset. 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.
7.2 Transactions Irreversible: The nature of Transactions is that they may be irreversible. This means accidental or fraudulent transactions in respect of Virtual assets may not be recoverable.
7.3 Risks relating to Timing: A Transaction is binding upon completion of the steps described in these Client Terms and Conditions. Following this, the Transaction may not be reversed. There is a risk that the final binding Transaction does not occur at the same time as Instructions are provided. You may suffer loss due to the fact that a Transaction is not carried out at the desired time.
7.4 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).
7.5 Reliance on the Internet: 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 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 HKSTOX’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.
7.6 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.
7.7 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.
7.8 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 Transaction or any of our services.
This includes (but is not limited to) interventions by way of:
- distributed denial of service;
- sybil attacks;
- social engineering;
- double spending;
- majority-mining, consensus-based or other mining attacks;
- misinformation campaigns;
- Forks; and
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.
7.9 Forks, Airdrops and Attacks: Virtual Assets may be subject to Forks or attacks (e.g. 51% 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 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 HKSTOX, or to the extent HKSTOX has any ability to impact such event, HKSTOX’s decision or actions may not be in your interests. Where you transfer Virtual Assets to HKSTOX which are the subject of a Network Event, you may not be entitled to the proceeds arising from any Network Event, and HKSTOX is generally entitled to keep any Virtual Assets created as a result of Network Events. You should not transfer assets to HKSTOX where you wish to receive the benefits of those Network Events.
8. General Risk Statements
8.1 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 Transaction. No term or product information provided by the applicable issuer has been subject to regulatory approval, 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.
8.2 Market, Liquidity and Conversion Risk: Where 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 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 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 do so 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 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.
8.3 Inflation Risk: Virtual Assets may, either because of the inherent design of the Virtual Asset or through Network Events, not be a fixed supply of assets. Where additional Virtual Assets are created, the asset’s price may decline due to inflationary effects of adding additional Virtual Assets to the total assets available.
8.4 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 over the Platform, and may be able to influence or cause 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 tokens.
8.5 Country Risk: If a 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 Transactions you should satisfy yourself about any rules or laws relevant to those particular 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 Transactions of Virtual Assets, we may be required to discontinue your access to the HKSTOX Platform and may not be permitted to transfer Virtual Assets held in the Account back to you or permit you to transfer Virtual Assets out of the HKSTOX Platform to yourself or others, until such time as the regulatory environment permits us to do so.
8.6 Jurisdiction-Related Risk: Residents, Tax residents or persons having a relevant connection with certain jurisdictions are excluded from carrying out 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 Transaction is, and remains lawful despite changes to applicable laws, your residence and circumstances.
8.7 Tax Treatment and Accounting: Some 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 among 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 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 Transactions, you should seek independent professional advice before carrying out a Transaction.
8.8 Regulatory Uncertainty: All Transactions are potentially exposed to regulatory/legal risk. The legal and regulatory treatment of 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 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 affect the value or potential profit of a Transaction. Legal changes may have the effect of making a previously acceptable transaction illegal or subject to substantial restrictions which may affect the ability to liquidate a position. Changes to related issues such as taxation may occur and radically affect the value or profitability of a Virtual Asset. Such risk is unpredictable and depends on various geopolitical, economic, sovereign and other factors. Risks may be asymmetrical between established and emerging markets, and may affect some Virtual Assets significantly more than others. HKSTOX recommends you obtain independent legal, tax and financial advice and that you continue to monitor the legal and regulatory position in respect of your Transactions.
8.8 Legal Status of Virtual Assets, Transactions and the HKSTOX Platform (APX.HK): The laws of various jurisdictions, standards or approaches published in statements by regulators may apply to Virtual Assets, and Transactions or services offered through the HKSTOX Platform. The application of these laws, regulations, standards and regulatory approaches to Virtual Assets is largely untested, and laws and regulations are subject to change without prior notice to either HKSTOX or you. In particular, any current governmental or regulatory tolerance of Virtual Assets may change rapidly, and Virtual Assets may at any time be deemed to be a security, investment, asset or money by governmental authorities or regulators, which will affect HKSTOX’s ability to conduct Transactions or hold Virtual Assets generally. As a result of regulation and legislation around Virtual Assets, or adherence by HKSTOX to regulatory standards or approaches, the HKSTOX Platform may not be available in certain jurisdictions, or at all. Changes to access to the HKSTOX Platform may be made unilaterally on short or no notice to you. HKSTOX may receive formal or informal queries, notices, requests or warnings by governmental authorities and regulators. Action may be taken by governmental authorities and regulators against HKSTOX. As a result of such events, HKSTOX may be required to discontinue the services, Transactions or the HKSTOX Platform. You may also be subject to governmental or regulatory action by conducting Transactions, holding Virtual Assets and/or using the HKSTOX Platform. You should take independent legal advice on the Client Agreement and the consequences of specific Transactions before signing the Client Agreement or conducting Transactions.
8.9 Lack of Information Available: You may not have full access to all the information relevant to the particular Virtual Asset, or its underlying platform or network. It may not be possible to obtain updated information regarding the progress or any changes to particular Virtual Assets, or their underlying platforms or network. Many Virtual Asset issuers or operates may also have no operating history or track record that any be used to evaluate the ability to achieve their stated project goals.