Risk Disclosure Regarding Crypto-Assets

1. Introduction

This Disclosure on Risks Associated with Crypto-Assets (“Disclosure”) is prepared by YouHodler Italy S.r.l. (“YouHodler”) in accordance with Regulation (EU) 2023/1114 (“MiCAR”).

2. Definitions

Pursuant to Article 3(1)(5) of MiCAR, “crypto-asset” means a digital representation of value or a right that can be transferred and stored electronically, using distributed ledger technology (“DLT”) or a similar technology (“Crypto-asset”).

Crypto-assets may, by way of example, have the following characteristics:

1. they may be issued by private entities or originate from decentralized protocols based on DLT or similar technologies; 
2. they may be held, transferred, and managed using digital tools (“wallets”) that allow the use of cryptographic keys associated with the relevant crypto-assets; 
3. they may be traded, converted, or exchanged via platforms that facilitate transactions in legal tender or other crypto-assets; 
4. transactions recorded on the blockchain are generally irreversible once validated and confirmed by the relevant network.

Crypto-assets do not necessarily constitute financial instruments, bank deposits, or electronic money under applicable regulations and do not automatically benefit from the protections provided for such categories of products or services.

3. Key risks associated with holding, transferring, and trading crypto-assets

The holding, transfer, conversion, and trading of crypto-assets involve high risks and may not be suitable for all clients, particularly those with a limited risk tolerance or reduced ability to sustain even significant losses.

Before trading in crypto-assets, the client is advised to carefully evaluate at least the following risk factors.

1. Price Volatility

Crypto-assets are characterized by high volatility. Their value may undergo even very significant fluctuations in short periods of time, both upward and downward, potentially resulting in the total loss of the invested capital.

Price movements may depend on speculative factors, limited liquidity, concentration of supply and demand, market sentiment, or technological and regulatory events that are not always predictable.

Crypto-asset markets may also be exposed to market manipulation, wash trading, spoofing, pump-and-dump schemes, or other abusive practices that can artificially influence prices, volumes, and liquidity.

2. Loss of Capital

Certain crypto-assets, including many so-called “unbacked” ones, do not confer redemption rights against an issuer nor are they backed by underlying assets that guarantee their value.

The price of crypto-assets may depend solely on market dynamics and the interplay of supply and demand. Even some crypto-assets that employ stabilization mechanisms may be subject to loss of stability, misalignments with the reference asset, or malfunctions in their protocols.

3. Execution and Liquidity Risk

Under certain market conditions, the client may not be able to buy, sell, or convert crypto-assets in a timely manner or under the expected economic conditions.

The actual execution price of orders may differ from the price displayed at the time the trade is entered, due to market volatility, available liquidity, or operational and technological delays.

4. Stablecoin depeg risk

Certain crypto-assets designed to maintain a stable value relative to a fiat currency or other assets (“stablecoins”) may lose, temporarily or permanently, their stabilization or pegging mechanism.

“Depeg” events can result in significant losses even very quickly.

5. Regulatory and tax risk

The regulatory framework governing crypto-assets is constantly evolving at the national, European, and international levels. Legislative, regulatory, or interpretive changes could adversely affect:

1. the availability or tradability of certain crypto-assets; 
2. the manner in which services are provided; 
3. the applicable tax treatment; 
4. regarding the accessibility or continuity of the services provided.

6. Counterparty, Custody, and Third-Party Risk

The use of services related to crypto-assets may entail risks associated with the parties involved in the provision of such services, including exchanges, custodians, liquidity providers, intermediaries, sub-custodians, or other Crypto-Asset Service Providers (“CASP”).

Service providers subject to applicable regulations—including, where relevant, AML/CFT obligations and MiCAR provisions—are required to implement organizational controls, security measures, and segregation mechanisms for crypto-assets and funds held on behalf of clients and may be subject to supervision by the competent authorities.

These measures constitute organizational and financial safeguards, but do not constitute public guarantees of repayment nor protection schemes comparable to those provided for bank deposits or traditional financial instruments.

Any defaults, insolvencies, malfunctions, security breaches, or operational disruptions attributable to such third parties may affect the continuity, timeliness, and security of transactions. Furthermore, reliance on a limited number of liquidity providers or market makers may result in concentration risks, reduced available liquidity, increased slippage, or limitations on order execution.

Not all operators offering crypto-asset services are subject to the same regulatory requirements. Before using a crypto-asset service, the client should verify that the provider is authorized, registered, or listed in the registries required by applicable regulations (for example, with the OAM or with the competent authorities under MiCAR, where applicable).

7. Third-Party Custody and Lack of Direct Control

Third-party custody (“custodial”) presents different risk profiles compared to the independent management of private keys (“non-custodial”). In the custodial model, the client relies on the organizational, technological, and security measures adopted by the service provider.

Holding crypto-assets through a service provider may mean that the customer does not directly hold the private keys associated with the crypto-assets themselves.

Even in the presence of asset segregation requirements and security measures, these safeguards do not constitute an absolute guarantee of the return of the crypto-assets.

Third-party custody may expose the customer to risks such as:

1. temporary operational limitations; 
2. suspensions or freezes ordered by the competent authorities; 
3. operational, technological, or security events affecting the availability of the crypto-assets or the services offered.

8. Irreversibility of Transactions

Transactions made via blockchain networks are generally irreversible once confirmed by the network. 

Errors in specifying the wallet address, the blockchain network used, or the type of crypto-asset may result in the permanent and irreversible loss of the transferred funds.

9. Operational and Cybersecurity Risks

Crypto-assets and related services rely on technological infrastructure, IT systems, and DLT networks that may be exposed to technical, operational, and IT risks.

The security of crypto-assets also depends on the customer’s behavior. Compromise of login credentials, devices used, or authentication systems may allow unauthorized access or fraudulent use of the services offered.

Key risks include:

1. cyberattacks and hacking; 
2. security breaches; 
3. software or hardware malfunctions; 
4. temporary system downtime; 
5. congestion or anomalies in blockchain networks; 
6. human error; 
7. scheduled or unscheduled maintenance that may temporarily limit access to the services offered;
8. risks of phishing, social engineering, SIM swapping, or compromise of the customer’s digital identities;
9. vulnerabilities in smart contracts, cross-chain bridges, interoperable protocols, or DeFi services used directly or indirectly;
10. dependencies on third-party ICT providers, cloud infrastructure, APIs, or outsourced technology services that could affect the operational continuity of the Services.
11. Risks arising from changes to decentralized governance mechanisms (DAO governance), alterations to voting processes, or decisions made by protocol communities that may affect the operation, value, or stability of crypto-assets.
12. Risks arising from operational or technological concentration on specific blockchains, validators, bridges, or decentralized infrastructure that could compromise the availability, operation, or security of Crypto-assets.

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10. Forks, protocol changes, and operational limitations

Blockchains may be subject to protocol changes, software updates, or forks that may affect the network’s operation or result in the creation of new crypto-assets. 

There is no guarantee that any new Crypto-assets resulting from forks or protocol changes will be supported or made available as part of the services offered.

The procedures for handling such events are governed by the applicable contractual documentation and the Terms of Service.

Certain categories of crypto-assets may also be subject to operational limitations or functional restrictions within the scope of the services offered by YouHodler. In certain cases, specific features may not be available, including deposits, withdrawals, or transfers related to certain types of tokens or blockchain networks.

4. Specific Risks Associated with the Services Offered by YouHodler

The Services offered through the Platform may include features that entail additional risks compared to the simple holding or trading of Crypto-assets.

1. Risks Related to the Custody of Crypto-Assets

The custody and management of Crypto-assets involves risks related to the storage of cryptographic keys, the security of technological infrastructure, and the operational reliability of the systems used for custody.

Although YouHodler implements security measures, asset segregation, and operational controls in compliance with applicable regulations, the custody of Crypto-assets may be exposed to risks such as:

1. cyberattacks; 
2. unauthorized access; 
3. operational or technical errors; 
4. temporary system downtime; 
5. events affecting proprietary or third-party technological infrastructure; 
6. operational limitations resulting from network events or measures taken by the competent authorities. 

Custody through a service provider also means that the customer does not directly hold the private keys associated with the custodied crypto-assets.

2. Risks related to conversion and order execution services

Conversion services between crypto-assets and funds, as well as between different crypto-assets, may be subject to market volatility, price fluctuations, and execution risks.

In particular:

1. the price actually applied to the transaction may differ from the price displayed at the time the order is placed; 
2. under conditions of high volatility or low liquidity, slippage may occur; 
3. order execution may be subject to delays, suspensions, or operational limitations; 
4. certain crypto-assets may have low liquidity or insufficiently deep markets. 

There is no guarantee that an order will be executed at a specific price or within specific execution times.

3. Risks Related to Crypto-Asset Transfers

Crypto-asset transfers made via blockchain infrastructure are generally irreversible.

Errors in specifying:

• the recipient’s wallet address; 
• the blockchain network used; 
• the type of crypto-asset being transferred; 
• the technical parameters required by the network; 

may result in the total and permanent loss of the transferred crypto-assets.

Transfers may also be subject to:

• blockchain network congestion; 
• increases in network fees; 
• validation delays; 
• protocol malfunctions; 
• temporary service suspensions; 
• technical issues involving wallets, smart contracts, or third-party infrastructure. 

The Company does not control the underlying blockchain protocols nor does it guarantee the operational continuity of the related decentralized networks.

5. Absence of Guarantee Schemes

The Crypto-assets and services offered by YouHodler do not benefit from the protections provided for bank deposits or traditional financial instruments, except as may be provided for by applicable law.

In particular, crypto-assets:

1. are not bank deposits; 
2. are not covered by deposit guarantee schemes under applicable European law; 
3. do not benefit from investor compensation schemes applicable to traditional financial instruments; 
4. may not be backed by any right to reimbursement from an issuer or other parties. 

Any asset segregation, custody, and security measures adopted by the Service Provider constitute organizational and operational safeguards, but do not amount to public guarantees of repayment or recovery of the value of the Crypto-assets held.

The potential insolvency of counterparties, custodians, exchanges, sub-custodians, or other operators involved in the provision of the Services could affect the availability, transferability, or recoverability of the Crypto-assets or funds held on behalf of the client.

6. No Guarantees of Return

Trading in Crypto-assets is characterized by high volatility and significant economic, technological, and regulatory risks.

YouHodler does not guarantee:

• the preservation of the value of the Crypto-assets; 
• the preservation of the invested capital; 
• the achievement of profits or returns; 
• the absence of losses; 
• the achievement of specific economic or financial results. 

Any returns, interest, rewards, yields, or other economic benefits potentially associated with services related to crypto-assets may be variable, unguaranteed, and subject to suspension, modification, or termination at any time, including as a result of:

• market conditions; 
• volatility of crypto-assets; 
• changes to blockchain protocols; 
• liquidation events; 
• a reduction in available liquidity; 
• operational or counterparty events; 
• regulatory or tax changes. 

The customer is therefore aware that the use of the Services may result in losses, including significant ones, up to the total loss of the Crypto-assets or funds used.

7. Suitability Assessment and Client Profiling

Access to certain Services related to Crypto-assets may be subject to the completion of profiling procedures, suitability assessments, or other checks required by applicable regulations or the Company’s internal procedures.

Such assessments may be conducted to gather information regarding:

• the customer’s knowledge and experience regarding crypto-assets; 
• the client’s understanding of the risks associated with the services offered; 
• investment objectives; 
• the client’s financial situation and ability to sustain potential losses; 
• the client’s risk tolerance. 

Based on the information collected, some services offered by YouHodler may not be appropriate for the client’s profile.

In such cases, the Company may:

1. provide specific warnings; 
2. restrict access to certain Services or features; 
3. request additional verification or information; 
4. not allow the activation or use of specific Services. 

The assessments made do not constitute, under any circumstances, investment advice, a personalized recommendation, or a guarantee regarding the economic or financial suitability of the transactions carried out by the client.

5. Final Considerations

Trading in crypto-assets requires a careful assessment of one’s financial situation, risk tolerance, and ability to withstand potential losses, including significant ones.

Before conducting transactions involving cryptocurrencies or signing up for services offered by YouHodler, customers are advised to:

1. carefully read the applicable Terms of Service and Disclosures;
2. assess the risks described above;
3. consider, where appropriate, seeking advice from independent consultants.

Use of the Services implies awareness of the risks associated with crypto-assets, including the technological, operational, regulatory, market, and counterparty risks described above.

YouHodler’s liability profiles, as well as any limitations or exclusions of liability permitted by applicable law, are governed by the Terms of Service and the applicable contractual documentation.

9. Updates to the Policy

This Policy may be updated, modified, or supplemented to reflect changes in laws, regulations, technology, operations, or the services offered by YouHodler.

Any material updates will be communicated to the customer in accordance with the procedures set forth in the Terms of Service or applicable law.