DISCLOSURE AND LIABILITY
Risk Disclosure Statement
Capitalised terms used in this Risk Disclosure Statement that are not otherwise defined shall have the meanings given to those terms in the main body of the attached Client Services Agreement.
This Risk Disclosure Statement is presented to you when you enter into a Client Services Agreement with Infinity Conglomerate Group and you must acknowledge having received, read and understood this Risk Disclosure Statement in order to engage Infinity Conglomerate Group under the terms of the Agreement. Please read this Risk Disclosure Statement in its entirety.
The Risk Disclosure Statement does not disclose all of the risks or relevant considerations associated with a decision to engage in trading of crypto currencies or the decision to engage Infinity Conglomerate Group under the Agreement.
Trading in crypto currencies may not be suitable for certain members of the public. You should carefully consider whether trading in crypto currencies is appropriate for you in light of your knowledge, experience, financial objectives, financial resources and other relevant circumstances.
INFINITY CONGLOMERATE GROUP IS NOT REGISTERED IN ANY CAPACITY WITH ANY CANADIAN OR FOREIGN SECURITIES REGULATORY AUTHORITY. NO INVESTMENT ADVICE OR RECOMMENDATION WILL BE PROVIDED BY INFINITY CONGLOMERATE GROUP OR ANY REPRESENTATIVES OF INFINITY CONGLOMERATE GROUP REGARDING THE PURCHASE OR SALE OF ANY SECURITIES OR DERIVATIVES.
Infinity Conglomerate Group believes that you should be aware of the risks involved in the purchase, sale and custody of crypto currencies. Crypto currency trading may not be appropriate for you, particularly if you use funds drawn from retirement savings, student loans, mortgages, emergency funds, or funds set aside for other purposes. The volatility and unpredictability of the price of crypto currencies relative to fiat currency may result in significant loss over a short period of time.
The following is a brief non-exhaustive summary of certain more significant factors and special risks you should take into account when deciding whether to trade crypto currencies.
What are crypto currencies?
In this Agreement, including this Schedule, the term “crypto currencies” refers exclusively to bitcoin, ether and such other crypto currencies as the Client and Infinity Conglomerate Group may agree to and authorise in writing.
Crypto currencies (such as bitcoin and ether) are digital representations of value that function as a medium of exchange, a unit of account, or a store of value, but do not have legal tender status.
Crypto currencies are sometimes exchanged for currencies, but they are not generally backed or supported by any government or central bank. Their value is derived by market forces of supply and demand, and they are traditionally more volatile than fiat currencies. The value of Crypto currencies may be derived from the continued willingness of market participants to exchange fiat currency for crypto currencies, which may result in the potential for permanent and total loss of value of a particular crypto currency should the market for a crypto currency disappear entirely. Federal, provincial, territorial or foreign governments may restrict the use and exchange of crypto currencies, and regulation in North America is still developing.
Crypto currencies differ in their functions, structures, governance and rights. Infinity Conglomerate Group will only trade in well established crypto currencies that function as a form of payment or means of exchange on a decentralised network, such as bitcoin and ether. These crypto currencies have certain features that are analogous to existing commodities, such as currencies and precious metals, but are also different in many key respects, as described in this disclosure statement.
Risks in trading crypto currencies
The following is a brief summary of some of the risks connected with trading crypto currencies.
(1) Short history risk
As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto currency. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto currencies will persist over time. The crypto currency community has successfully navigated a considerable number of technical and political challenges since the genesis of the bitcoin blockchain, which Infinity Conglomerate Group believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto currency community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto currency.
Open source developers of blockchain technology have signalled that they will continue to make efforts to improve the scaleability and security of public blockchains like bitcoin and ethereum. For example, in respect of the ethereum blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the bitcoin blockchain, for example with the continued development of scaleability protocols like the Lightning Network, which operate on top of the bitcoin blockchain. The expected timing and impacts of this change are uncertain.
(2) Volatility in the price of crypto currency and loss of liquidity
The crypto currency markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. crypto currency prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto currencies that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto currencies.
The trading of crypto currencies on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto currencies, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto currencies on the trading platform, which could result in volatile prices and reduced confidence in the crypto currencies traded on those platforms.
(3) Potential decrease in global demand for crypto currencies
Crypto currencies represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto currency priced by the supply and demand of global markets for its own utility within remittances, B2B payments, time-stamping, etc. Speculators and investors using crypto currency as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto currencies as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto currencies will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto currencies for payments by mainstream retail merchants and commercial businesses will continue to grow.
While the value of bitcoin may be derived primarily from its capitalisation and position as first mover, the value of ether relies far more on its underlying blockchain technology. The ethereum blockchain is intended to allow people to operate decentralised applications using blockchain technology that do not rely on the actions of a centralised intermediary. Ether, which is the primary currency of the ethereum blockchain, can then be used to compensate for the effort of others to power these decentralised applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralised applications built upon the ethereum blockchain.
(4) The blockchains on which crypto currencies operate may temporarily or permanently fork
Both the bitcoin and ethereum blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the premodification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the bitcoin and ethereum blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto currency. Your Trading Platform may choose not to support any future fork of the underlying blockchain of the crypto currencies available on that platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.
(5) Issues with the cryptography underlying the crypto-networks
In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the bitcoin and ethereum blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto currencies traded in your Client Account.
(6) Uncertainty in regulation and future financial institution support
The regulation of crypto currencies continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto currencies or otherwise impact the demand for crypto currencies. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto currency activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto currency transactions, process wire transfers to or from crypto currency trading platforms, crypto currency-related companies or service providers, or maintain accounts for persons or entities transacting in crypto currencies.
(7) Concentration risks
Certain addresses on the bitcoin and ethereum blockchain networks hold a significant amount of the currently outstanding bitcoin and ether, respectively. If one of these addresses were to exit their bitcoin or ether positions, it could cause volatility that may adversely affect the price.
Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto currencies. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like bitcoin and ethereum to store value and serve as a means of exchange, which may significantly decrease the value of crypto currencies.
(8) Electronic trading and dependence on the internet
There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Infinity Conglomerate Group does not control signal power, reception, or routing via the internet. Under certain market conditions, we may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto currency suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto currency system. The greater the volatility of a particular crypto currency, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.
(9) Cyber security risk
The nature of crypto currencies may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Infinity Conglomerate Group or one of the Trading Platforms to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Infinity Conglomerate Group or the Trading Platforms to incur regulatory penalties, repetitional damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorised access to Infinity Conglomerate Group’s or one of the Trading Platform’s digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). Cyber security breaches of Infinity Conglomerate Group’s third-party service providers (e.g. the Trading Platforms, and other service providers) can also give rise to many of the same risks associated with direct cyber security breaches.
(11) Lack of investor protection insurance
Investments in crypto currencies are not protected by the Canadian Investor Protection Fund, the Canadian Deposit Insurance Corporation or any other investor protection insurance scheme.
(12) Commission and other charges
There may be costs associated with the use of Trading Platforms, which are subject to change. Any fees associated with the use of your authorised Trading Platforms will be paid directly out of your Client Account.