Risk summary (Take 2mins to learn more):

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.

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

• There is no guarantee that investments in cryptoassets and stablecoins can be easily sold at any given time. The ability to sell a cryptoasset or stablecoin 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 and stablecoins 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. Stablecoins are not always stable  

• Stablecoins aim to maintain a stable value linked to another currency, but they are not immune to price fluctuations, and there is no certainty that their value will remain stable or pegged 1:1 to the other currency. 

6. The stability of asset-backed tokens is not based only on the underlying asset 

• The value of asset-backed tokens is subject to fluctuations in the market of the underlying asset (e.g. gold), however, the stability of the asset-backed token relies on the financial strength and reliability of the issuer and custodian responsible for backing the token. 

7. Meme coins are known for their extreme price volatility 

• Investing in meme coins is highly speculative and may involve a high degree of risks. They may lack inherent value or practical utility and are often driven by social media trends and community sentiment. 

8. DeFi tokens are exposed to smart contract vulnerabilities and oracle data inaccuracies 

• Smart contract vulnerabilities, reliance on potentially inaccurate external data from oracles, and the possibility of project abandonment are key risks associated with DeFi tokens.

• The unregulated nature of DeFi tokens poses additional uncertainties, as regulatory changes may impact their value and legality. 

9. Wrapped and bridged tokens rely on the collateralization and bridging mechanisms 

• The value of wrapped and bridged tokens is backed by collateral of another cryptoasset and any issues the collateralization mechanism or the custodian holding the assets could adversely affect their value.

• Issues with the bridging infrastructure may cause transfer delays or token losses, while demand and liquidity disparities with the underlying asset may lead to price variations.

10. Fan tokens are linked to the popularity of sports clubs 

• Fan tokens are created for sport clubs fans, offering access to exclusive content, merchandise, experiences, voting rights and other perks within the clubs' ecosystems.

• Their value hinges on club success and popularity, making them highly susceptible to price volatility. 

11. 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.

12. Staking may lead to loss of your staked cryptoassets or staking rewards 

• When you stake your cryptoassets, they are used to support network operations through third-party validators. If these validators behave improperly (e.g. go offline, act maliciously, or fail to follow protocol rules), you may lose part or all of your staked assets through penalties known as "slashing." Staking rewards are not guaranteed and may be reduced or withheld entirely due to validator performance or protocol changes. 

• ETH staking requires you to actively opt in and carries higher risks, including the possibility of slashing (loss of funds) due to validator misbehaviour. ADA, on the other hand, is automatically staked unless you choose to opt out, and it does not carry slashing risk. 

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

For further information about cryptoassets, visit the FCA’s website.