Risk Summary

TransFi Crypto Risk Summary

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Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the Key Risks?

1. You could lose all the money you invest

• The performance of most cryptoassets can be highly volatile, with their value dropping as quickly as it can rise. You should be prepared to lose all the money you invest in cryptoassets.
• The cryptoasset market is largely unregulated. There is a risk of losing money or any cryptoassets you purchase due to risks such as cyber-attacks, financial crime and firm failure.

2. You should not expect to be protected if something goes wrong

• The Financial Services Compensation Scheme (FSCS) doesn’t protect this type of investment because it’s not a ‘specified investment’ under the UK regulatory regime – in other words, this type of investment isn’t recognised as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checker here
• The Financial Ombudsman Service (FOS) will not be able to consider complaints related to this firm. Learn more about FOS protection here.

3. You may not be able to sell your investment when you want to

•  There is no guarantee that investments in cryptoassets can be easily sold at any given time. The ability to sell a cryptoasset depends on various factors, including the supply and demand in the market at that time.
• Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delay and you may be unable to sell your cryptoassets at the time you want.

4. Cryptoasset investments can be complex

• Investments in cryptoassets can be complex, making it difficult to understand the risks associated with the investment.
• You should do your own research before investing. If something sounds too good to be true, it probably is.

5. Don’t put all your eggs in one basket

• Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well.
• A good rule of thumb is not to invest more than 10% of your money in high-risk investments.(https://www.fca.org.uk/investsmart/5-questions-ask-you-invest) 

Product-Specific Risk Summary

Stablecoins

Stablecoins, such as USDT and USDC, are crypto-assets designed to maintain a stable value by pegging to reserve assets like fiat currency. However, they still carry financial risks, including:

• Counterparty Risk: Stablecoins backed by collateral depend on third parties to maintain the collateral. Insolvency or mismanagement of these parties can undermine the stability of the asset.
• Redemption Risk: Redemption processes may fail during periods of high market volatility or operational issues, preventing access to the underlying collateral.
• Collateral Risk: Stablecoins backed by other crypto-assets are subject to volatility in the value of the collateral, potentially affecting stability.
• Foreign Exchange Risk: Stablecoins denominated in foreign currencies (e.g., USD) expose investors to exchange rate fluctuations against their local currency.
• Algorithmic Risk: Stablecoins relying on algorithms to maintain stability (e.g., supply adjustment mechanisms) may fail, leading to instability or total loss of value.

DeFi Tokens

Decentralized Finance (DeFi) tokens, such as SOL, are associated with blockchain-based financial protocols and present unique risks, including:

• Smart Contract Risk: DeFi protocols rely on smart contracts, which may contain coding vulnerabilities, potentially leading to significant financial losses.
• Regulatory Risk: DeFi operates in a decentralized manner, often without regulatory oversight. Future regulations could impact the value, legality, or operations of DeFi assets.
• Rug Pulls/Exit Scams: Projects led by anonymous developers may lead to sudden abandonment, causing significant losses for investors.
• Data/Oracle Risk: Manipulated or inaccurate data inputs to DeFi protocols can result in unintended financial consequences.
• Complexity: The intricacies of DeFi protocols can make it challenging for average users to fully understand the risks.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.

For further information about crypto-assets, visit the FCA’s website here.