Risk of price volatility
The value of crypto-assets is highly volatile. Clients may incur significant, or even total, losses of funds when buying, selling or exchanging crypto-assets. Clients should carefully consider whether exchanging crypto-assets for cash or other crypto-assets is appropriate in light of their individual risk tolerance. The value of crypto-assets is not guaranteed by any institution and cannot be used as legal tender to settle obligations.
It should also be noted that this risk applies to so-called ‘stablecoins’, i.e. cryptoassets designed to maintain a fixed exchange rate – usually at a 1:1 ratio – against traditional fiat currency. Such a rate may be maintained through a third party’s commitment to exchange the stablecoin for fiat currency or via an algorithm operating on the basis of distributed ledger technology (DLT). However, there is no guarantee that stablecoins will maintain this exchange rate. In the past, the exchange rate of many stablecoins has lost its peg to traditional fiat currency, leading to total or partial losses for holders. This loss of peg can occur for a variety of reasons, including the insolvency of a significant counterparty or the failure of a key algorithm.
Stablecoins are issued, operated and maintained by third parties over whom Elevare has no control. In the event of a loss of peg, there is usually little or no recourse for claims.In addition, stablecoins such as USDC are denominated in US dollars, which may expose the Customer to exchange rate risk associated with converting the value between USD and their local currency, e.g. USD:EUR for EU users using the euro.
Crypto-assets not compliant with MiCA
Crypto-assets vary in terms of compliance with the regulatory requirements under the MiCA Regulation. Crypto-assets that are not fully compliant with these requirements may entail additional risks compared to those that meet all MiCA standards.
Elevare therefore strongly recommends trading only in MiCA-compliant crypto-assets to mitigate these risks.
Issuers offering stablecoins or seeking to have them admitted to trading on the EU market are required to obtain the relevant authorisation in accordance with MiCA. However, it should be noted that not all stablecoins available on the service offered by Elevare are issued by entities holding such authorisation. A lack of authorisation may entail increased risks regarding redemption, transparency and disclosure obligations, and may limit the ability to liquidate such assets.
For these reasons, Elevare warns against and recommends conducting transactions only in stablecoins issued by entities whose activities comply with MiCA.To verify whether a given issuer holds a licence, you can consult the regularly updated ESMA register.
Risks associated with memecoins
Memecoins are a type of crypto-asset typically derived from internet culture, humour or popular trends. They often gain popularity rapidly, but usually lack a real-world utility, a long-term development strategy or a known, regulated issuer. Memecoins are highly speculative in nature and are particularly susceptible to extreme and unpredictable price fluctuations. Their value can rise or fall sharply in a short period, often driven by activity on social media, recommendations from influencers, or the actions of online communities. Clients should be aware that memecoins:
- in general dothe publicationmeetthe requirementsMiCArelating toof a white paper or the traceability of the issuer;
- may be susceptible to market manipulation, including ‘pump-and-dump’ schemes;
- may be illiquid, making them difficult to sell;
- they may suddenly and completely lose their value.
Before entering into a transaction involving memecoins, the Client should carefully assess their financial situation and risk tolerance.
Account security risks
Crypto-asset platforms and associated accounts are often the target of hacking attacks and attempts to gain unauthorised access to clients’ funds.
This may result in the irreversible loss of funds.The Client is responsible for securing their account. In addition to choosing a strong password, Elevare strongly recommends enabling two-factor authentication (2FA).
Risks associated with decentralised protocols
Unlike most currencies or assets backed by governments, legal institutions or commodities such as gold or silver, crypto-assets are a unique asset class based on technology and rule-based collaboration. There is no central bank or other entity that could take corrective action to protect the value of a given crypto-asset.
Elevare does not control nor is it responsible for the provision, quality, security, legality or other characteristics of the crypto-assets that the Client may purchase, hold or sell through its services. Elevare does not own or operate the underlying software protocols that govern the functioning of the supported crypto-assets. These protocols may change or cease to function without notice, which may lead to the total loss of crypto-assets or their value. Due to the nature of distributed ledger technology (DLT), any crypto-assets held or traded on the platform may be irreversibly lost, damaged or deleted – either temporarily or permanently.
Irrevocability of transactions
Please note that transactions involving crypto-assets are final and cannot be reversed once confirmed. Elevare explicitly informs you of this before each transaction to ensure you are fully aware before proceeding.It is recommended that you carefully check the transaction details before confirming, as once approved, it cannot be reversed.
Tax risks
Tax rules relating to crypto-assets may vary by jurisdiction and are subject to change. Clients should seek professional advice to understand their tax obligations in relation to the use of Elevare’s services.