Version 1
June 2024
This Risk Disclosure Statement (the “Statement”) informs prospective clients on the potential risks associated with virtual assets and the use of STIX OTC FZE (hereafter referred to as “STIX”, “Company”, “we”, “us”, “our”) Services (as defined hereinbelow). STIX is licensed by the Dubai Virtual Assets Regulatory Authority (“VARA”) to undertake ‘Broker Dealer Services’ and ‘Advisory Services’ (“Services”) and this Statement has been prepared in accordance with VARA’s licensing conditions as well as all applicable UAE regulations, guidance and international best practices. STIX may make amendments to this Statement, as may be deemed appropriate, necessary or if so, directed by the VARA and/or the concerned regulators.
Each of our Services has its own distinct risks and this Statement highlights the general risks associated with using our Services. This Statement does not explain all of the risks, go into depth on each individual risk, or how such risks relate to your personal circumstances. This list is not exhaustive and there may be additional risks that we have not anticipated or listed as part of this Statement.
It is important that you fully understand the risks involved and we encourage all users to thoroughly read and understand this Statement before using our Services. By using our Services, you acknowledge and accept the risks detailed in this Statement as well as any other risks associated with using our Services.
Any and all capitalized terms not defined in this Statement shall have the same meaning and construction as in Client Agreement (available at [www.stix.co/agreement]) as defined thereunder (the “Agreement”) and this Statement should be read in conjunction with the Agreement.
(a). Virtual assets are not legal tenders: A majority of virtual assets are not backed by any central government or are not recognized as legal tender. There is no guarantee that a vendor, issuer or an individual will continue to accept virtual assets as payment in the future merely because they do so now. You should be aware that the acceptance and value of virtual assets may fluctuate and are subject to market dynamics.
(b). General market risk: The market for virtual assets is new and constantly developing and changes in value may be significant and/or occur rapidly and without warning. Whether the market for one or more virtual assets will move up or down, or whether a virtual asset will lose all or substantially all of its value, is unknown. Past performance is not a reliable indicator of future performance. You should be cautious about how you may be impacted by sudden and adverse shifts in market activities. Investment in virtual assets involves significant risks and it is possible that you may lose a proportion or substantial part of all of your investment. You should not invest funds that you are not prepared to lose in their entirety. Performance of virtual assets is subject to various factors, and you should carefully consider whether you can afford to bear the risks of investing in virtual assets.
(c). High price volatility: The value of virtual assets is entirely derived by market forces of supply and demand. It is generally understood that the market for virtual assets is more volatile than most markets for traditional fiat currencies and commodities like silver and gold. It is common for prices to increase or decrease significantly in a single day. Although this could result in profits, this could also result in losses. You should carefully consider whether you can afford to bear the risks of investing in virtual assets. Moreover, virtual assets are not backed by a central bank, a national or international organization, assets or other forms of credit, although in some specific cases may be backed to an extent by physical assets. Virtual assets may have no inherent value; in most cases, the price of virtual assets is entirely dependent on the value that market participants place on them, meaning that any increase or loss of confidence in virtual assets may affect their value.
(d). Irreversible transactions and custody: Due to the decentralized nature, transfers of virtual assets may be irreversible and therefore, losses due to fraudulent or accidental transactions may not be recoverable. Customers of third-party service providers for virtual assets custody, trading, lending, staking or other purposes may not directly control the virtual assets held through such third-party service providers. The obligations associated with these custodial and other arrangements to safeguard virtual assets involve unique risks and uncertainties that are not present in arrangements for safeguarding conventional assets. For example, due to the unique characteristics of virtual assets and the lack of legal precedent, there are significant legal questions surrounding how such arrangements would be treated in a court proceeding arising from an adverse event (e.g., fraud, loss, theft or bankruptcy).
(e). Liquidity risk: Markets for virtual assets have varying degrees of liquidity. Liquidity risk exists when particular investments are difficult to purchase or sell, possibly preventing you from selling out of these illiquid investments at an advantageous price, or at all. Thin markets can also amplify volatility and cause significant delays in executing trades. Investment markets of this nature are likely to exhibit broader price spreads and heightened responsiveness to buying and selling pressures compared to more actively traded markets. The lack of liquidity can stem from multiple factors, including market conditions, regulatory interventions, technological challenges, or unanticipated events. Such illiquidity could potentially affect the ability to initiate or terminate positions, potentially resulting in losses or delays in accessing funds.
(f). Risk of Advice: While we strive to provide accurate and timely advice, there is no guarantee that the advice will result in profitable outcomes or meet your investment objectives. The value of virtual assets can be highly volatile and may fluctuate based on various factors beyond our control. You should be aware of the inherent risks associated with virtual asset investments and carefully consider their risk tolerance before acting on any advice provided by us. You are requested to undertake an independent assessment of the risks associated with making any investment decisions based on your own assessment, resources, research, inquiries and experience. You understand and acknowledge that STIX shall not be liable for any loss, claims or damages (whether direct or indirect) arising from or in connection with any of the risk events specified below. You are solely responsible for decisions concerning whether an investment, strategy, or other product or service is suitable for you.
(g). Conflict of Interest Risk: We may have potential conflicts of interest that could affect the advice provided to clients. We endeavor to manage conflicts of interest appropriately and disclose any material conflicts to you, but you should be aware of the potential for conflicts when receiving advice from us.
(h). Public record of transactions: Given the nature of virtual assets, some transactions may not be private and may be recorded on public decentralized databases.
(i). Market manipulation and fraud risk: Manipulative practices in the virtual asset market can create a distorted picture of liquidity or trading activity for a specific virtual asset and may affect its pricing. Further, the market is subject to an increased risk of fraud, including the potential for bucket shops, Ponzi schemes and pump and dump schemes. Such targeted schemes may result in the loss of virtual assets or a decrease in or loss of all value of your virtual assets, and you may not benefit from legal protections.
(j). Increased cyber-attack: Virtual assets are often targeted by hackers and criminals who commit fraud and/or theft. This includes attacks on the protocol or technologies on which our Services depend/function on, including, but not limited to 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. The very nature of virtual assets and distributed ledger technology may lead to an increased risk of cyber-attack. Legal protections may not apply to such targeted malicious acts.
(k). Account security risk: Unauthorised access by third parties of your login credentials to gain access to your account, including through carelessness or forgetfulness by the account holder, or the third-party obtaining control over another device or account used by you in connection with any enhanced security measures enabled for your account. It is not possible to eliminate all security risks. You acknowledge and accept that you are responsible for keeping your account and log-in details safe, and you may be responsible for all the transactions conducted through your account, whether authorised by you or not.
(l). Unauthorised access: You must accept the provisions present in the Agreement regarding your care, due diligence and responsibility in the handling of unique log-in credentials to your account. The lack of your care, due diligence and responsibility in this regard may result in a third-party gaining access to your account and hence your virtual assets and personal information. Losses resulting from the aforesaid may not benefit from legal protection.
(m). Legal risk: The legal environment and status of virtual assets and related virtual asset services is continuously developing and may be uncertain. Changes in laws and regulations by VARA and/or any relevant regulatory authority may materially affect the value, price, use, transfer, exchange, operation, acceptance, control, and/or access of virtual assets. Whether and how one or more virtual assets constitute property, or assets, or rights of any kind may also be unclear. Furthermore, when buying virtual assets or tokens directly from issuers, there may be a lack of clear regulatory treatment for the said token or token issuer. Similarly, the regulatory treatment of contractual agreements in relation to the purchase of illiquid tokens (such as Simple Agreements for Future Tokens (“SAFTS”), Token Purchase Agreements (“TPA”) and Token Warrants) is continuously developing and may be uncertain and/or not provide full legal protection in certain jurisdictions. Customers should seek legal advice where necessary and engage with the relevant experts before entering into any contractual agreements to ensure they are in compliance with the local regulatory requirements.
(n). Contractual risk: We may provide information on the website, platform, in our communications or in any other form in relation to an issuer and their listing as well as the proposed contractual arrangement however such information is only an indicative and should not be taken or relied upon as the complete description of the of the issuers offering and related contractual arrangements. Such contractual agreements are not standardized, are determined by the issuer and in certain instances may be open to negotiation. Customers are expected to carefully review all terms and conditions and understand their rights and obligations when dealing directly with issuers. Customers and issuers are expected to conduct their own due diligence on the counterparty to their transaction. We do not negotiate on behalf of either party. We do not represent either party. We do not have control over the issuers offering, issuance, contractual arrangements and/or negotiations. Customers and issuers understand such engagements are made directly with each party and the Company does not act for either party in this respect.
(o). Taxation risks: The tax characterization of virtual assets is uncertain. You must seek your own tax advice in connection with acquisition, storage, transfer and use of any virtual asset, which may result in adverse tax consequences to you, including, without limitation, withholding taxes, transfer taxes, value added taxes, income taxes and similar taxes, levies, duties or other charges and tax reporting requirements. It is your responsibility to report and pay any taxes that may arise from transacting using our Services, and you acknowledge that STIX does not provide tax advice in relation to any transaction carried out using our Services.
You are encouraged to seek professional and personal legal and tax advice regarding the above and before making any virtual asset transaction.
(p). Enforcement actions: We may cease operations in a jurisdiction in the event that regulatory actions, or changes to law or regulation, make it illegal to operate in such jurisdiction, or commercially undesirable to obtain the necessary regulatory approval(s) to operate in such jurisdiction.
(q). Recording of transaction on public ledgers: Some virtual-asset transactions may be deemed to be made when they are recorded on a public ledger, which may or may not necessarily be the date or time when you initiated the transaction, resulting in any cancellation being rendered ineffectual in some situations.
(r). Risk of software weakness: Because the Services we provide are in relation to blockchain and/or other distributed ledger technology, any malfunction, breakdown or abandonment of any blockchain may have a material adverse effect on the Virtual Assets available on the Company’s platform. Moreover, advances in cryptography, or technology could present risks to the Virtual Assets available on the Company’s platform, by rendering ineffective the cryptographic consensus or other technological component mechanisms that underpins blockchains.
(s). Risk of mining attack: Some blockchains are susceptible to mining attacks, including but not limited to double-spend attacks, majority mining power attacks, “selfish-mining” attacks, and rare condition attacks. Any successful attacks present a risk to the Services, and the expected proper execution and sequencing of transactions carried out through the Services.
(t). System risk: You acknowledge and understand that we may experience system interruptions or delays due to outages, power loss, telecommunications failure, disasters, cyberattacks, system malfunctions, or other events and such interruptions or delays may affect our Services to you temporarily. We do not guarantee that our Services will be completely free from harm and uninterrupted and/or available at any particular time or that Services will not be subject to unplanned service outages or network congestion.
(u). Third party outages: We may deliver our Services to you using third-party providers. While the performance of these providers is monitored on a constant basis, an outage at one of the firm’s partners could affect its service to you in the short-term.
(v). Third party risks: Third parties may be involved in the provision of our Services or any part thereof, whether directly or indirectly. You may be subject to the terms and conditions of these third parties. You acknowledge and understand that you may suffer losses incurred from actions, inaction or conditions regarding third parties, including those engaged or partnered by us for the provision of our own Services or any part thereof, whether directly or indirectly, to you and those engaged by yourself for the use of our Services (e.g., the banking services or wallet services you use), as well as those neither engaged by you nor by us. To the extent possible under the applicable legislation, we shall not be held responsible for any loss that these third parties may cause you when you are using our Services.
(w). Risk of Failure to Issue or Non-Issuance by Sellers: The Company’s platform makes it possible for holders of illiquid Virtual Assets or contractual instruments that give holders entitlements to Virtual Assets (such as SAFTS or TPAs (Collectively hereafter referred to as “Associated Contractual Rights”)) to easily list and sell such illiquid tokens or Associated Contractual Rights. While the Company employs all measures to ensure that Sellers and the Virtual Assets they propose to make available on the Platform are in compliance with the Company’s policies and procedures, VA Standards, as well as the VARA’s laws and regulations, including a comprehensive KYB/ KYC process, the Company does not control the ultimate issuance of a Virtual Asset by a Seller. The Company only acts as a means of communication between the Sellers and Buyers and does not undertake any issuance activity or provides any issuance related services. Accordingly, the Company does not accept any responsibility, nor shall we be held responsible for any changes, losses, deviations, differences in the Virtual Assets issued by Sellers, including failure or weakness of the underlying blockchain or distributed ledger technology and/or ultimately delay in issuance or failure to issue such Virtual Assets by Sellers.
(x). Risk of Non-Compliance of Third Parties: The Company’s Broker Dealer Services are limited to only ‘arranging’ for the sale or purchase of Virtual Assets or Associated Contractual Rights which allow for the sale or purchase of the Virtual Assets. In the process of providing its Broker Dealer Services, the Company shall not execute an order, act as an agent, or act as the principal during any transaction between Buyers and Sellers on the Platform, whether for sale or purchase of Virtual Assets. Furthermore, the Company will not take custody, control, hold or manage client money or client Virtual Assets at any point during a transaction between Buyers and Sellers on the Platform. The Company’s Advisory Services are limited to Virtual Assets available on the Platform, and may be further limited to specific Virtual Assets only and not all Virtual Assets available on the Platform. Further, the Company only facilitates the transactions between Buyers and Sellers and does not control over negotiate on behalf of Buyer or Seller, nor does it exercise any control or prejudice over the transactions themselves. Therefore, we shall not be held responsible for any non-compliance and/or breach by the Buyers and Sellers to the terms of any such transactions.
(y). Information risk: There are risks associated with utilizing an internet-based system including, but not limited to, the failure of hardware, software, and internet connections, the risk of malicious software introduction. We do not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection. Failure of the foregoing may result in your transaction either not being executed according to your instructions, or not executed at all. Furthermore, when you communicate with us via electronic communication, you should be aware that electronic communications may fail, be delayed, be unsecure and/or not reach the intended destination.
(z). Unanticipated risks: The risks described herein are neither intended to be a comprehensive nor an exhaustive list of risk factors. You remain responsible for taking care to understand the technology, economic and legal nature of virtual assets and for carefully managing your exposure in accordance with that understanding and your risk appetite for innovative, volatile and speculative new technologies and virtual assets.
Please read this Statement carefully and consider the risks described herein before engaging with STIX. Kindly note that the above listed risks are only indicative and not exhaustive.