Risk Disclosure

Introduction

UAB Fintech Europa (“Paramountdax”) is a private limited liability company, incorporated in Lithuania (registration number chamber of commerce 305334957), whose registered office is J. Basanavičiaus g. 26, Vilnius Lithuania. 

PARAMOUNTDAX is licensed by the Lithuanian Authority for Financial Markets (Autoriteit Financiële Markten- AFM) as a crypto asset service provider under Regulation (EU) 2023/1114 on markets in crypto-assets, as amended or supplemented from time to time (MiCA) and is, among others, permitted to provide the service of ‘operation of a trading platform for crypto assets. 

PARAMOUNTDAX Custody B.V. (“PARAMOUNTDAX Custody”), is a private limited liability company, incorporated in the Netherlands (registration number chamber of commerce 80118844), whose registered office is J. Basanavičiaus g. 26, Vilnius in Lithuania. 

The services provided by PARAMOUNTDAX and PARAMOUNTDAX Custody are governed under the user agreement ( the User Agreement). PARAMOUNTDAX Custody is a party to the User Agreement only in relation to the Lending Service, if any.

The use of the PARAMOUNTDAX Services and PARAMOUNTDAX Trading Platform, and trading Digital Assets may carry risks that are beyond PARAMOUNTDAX's control,  and PARAMOUNTDAX and PARAMOUNTDAX Custody are not liable for such risks.This Risk Disclosure Statement sets out a non-exhaustive list of these risks. Other risks that are not mentioned herein and that are specific to a particular Digital Asset may also apply. Those will be set out in  the respective white paper associated with the relevant Digital Asset, if available. For Digital Assets that are available for trading on the PARAMOUNTDAX Trading Platform from time to time, these white papers are referenced on the PARAMOUNTDAX Trading Platform and/or PARAMOUNTDAX Environment.

This Annex should not be regarded as a comprehensive disclosure of all risks related to trading or investment in Digital Assets.

It is important for the User to carefully evaluate whether investing in Digital Assets and using any Services is suitable for their tolerance, investment goals, financial and tax circumstances, personal and legal conditions, and any other relevant factors.

This risk disclosure statement, which includes some of the most principal risks of using the Services, may be helpful for that assessment.

Capitalized terms used and not otherwise defined are defined in the User Agreement. This Risk Disclosure Statement is drawn up in English as well as other language versions. In case of any discrepancy the English language version prevails.

1. Market Risk

Every investment involves opportunities and risks. The value of Digital Assets may fluctuate significantly. There is an inherent risk that a User will incur material losses if a User trades Digital Assets and PARAMOUNTDAX provides related Services to the User. Past performance of certain Digital Assets does not indicate future results. Such investment is only suitable for Users, who can bear a loss of the entire invested capital and should not be considered as or entered into with the expectation of a stable source of income. This means that the User should assess, for each and any of the Services they consider, whether the related risk is appropriate for their financial situation, risk appetite and other personal circumstances.

1.1. Liquidity Risk

Some Digital Assets may have low liquidity and this may effect timely execution of Orders at desired prices or lead to partial execution. Illiquid markets can result in wider spreads and higher trading costs.Volatility in illiquid markets tend to be higher due to less liquid order books. 

1.2. De-pegging Risk 

Certain Digital Assets refer to other fiat currencies and asset types and intend to maintain a stable value (generally referred to as stablecoins). The value of such Digital Assets may, however, decrease when the Digital Assets lose their 1-1 peg due to market conditions, failures or insolvency of the Issuers or loss of reserve assets, regulatory actions, and the User may incur partial or material losses.

1.3. Slippage Risk 

Market Orders may execute at a price different from the price that is indicated due to high volatility, limited liquidity, or execution delays.
 

1.4 Currency Risk

USD coins are also offered on PARAMOUNTDAX Trading Platform and this may lead to a currency conversion risk for the Users where base currency is EUR. 

1.5. Concentration Risk

Events that could have an impact on a Digital Asset may have a substantial impact on portfolio concentrated on that Digital Asset.

2. Risks inherent to crypto technology and design 

Digital Assets are not backed by governments, or by commodities such as gold. There is no central bank that can take corrective measures to protect the value of Digital Assets in a crisis, such as issuing more Digital Assets. Instead, Digital Assets are autonomous and largely unregulated on blockchain networks. This means that the User should be prepared to trust in a digital, decentralized and partially anonymous system that relies on peer-to-peer networking and cryptography to maintain its integrity. User must be aware of the risks associated with technology, including (but not limited to) failures in hardware, software, and internet connectivity, malicious software or cyber-attacks, third parties gaining unauthorised access to information and/or assets (including their Digital Assets), failures or outages in blockchain networks, and other forms of attacks.

This also means PARAMOUNTDAX may not have control over, or liability for, the delivery, quality, safety, legality or any other aspect of the Digital Assets for which PARAMOUNTDAX offers Services to User. In case of any systemic failure, this could result in a loss of User's Digital Assets.

3. Systemic Risk 

The crypto-asset ecosystem is interconnected, with certain participants such as trading platforms, stablecoin issuers, custodians, and liquidity providers playing central roles. A failure or insolvency of one major participant—such as a widely used exchange, stablecoin issuer, or custodian—may trigger cascading failures or a broad loss of trust in the market. This could affect the liquidity, pricing, or accessibility of a wide range of Digital Assets, even those not directly linked to the failing participant.

PARAMOUNTDAX cannot prevent or mitigate such ecosystem-wide risks and may also be affected through shared infrastructure, counterparties, or market dependencies. Users should be aware that systemic risks may result in disruptions to Services, temporary inaccessibility of assets, or sudden changes in asset values.

4. Regulatory and Jurisdictional Risk

It is possible that statutory or regulatory changes have material effects on the current setup of the PARAMOUNTDAX Trading Platform. Statutory or regulatory changes may also result in substantial modifications to any Digital Assets. PARAMOUNTDAX cannot guarantee that certain regulatory or legal changes may not result in the limitation or termination of certain Services on the PARAMOUNTDAX Trading Platform.

5. Tax Risks

The purchase, sale, exchange or holding of Digital Assets available may trigger tax consequences for User. While several countries have already implemented specific tax regulations for Digital Assets, further changes and/or additional tax regulations are to be expected. PARAMOUNTDAX may under certain circumstances (now and/or in the future) be required to deduct withholding tax. Withheld tax amounts are remitted to the tax authorities, and PARAMOUNTDAX will be unable to refund these amounts. PARAMOUNTDAX will report information with respect to transactions made by User and/or Digital Assets held by User to one or more tax authorities to the extent such reporting is required by applicable law. PARAMOUNTDAX shall deduct and withhold tax on User's transactions to the extent such withholding is required by applicable law. PARAMOUNTDAX may collect tax documents or certificates regarding User's status as a taxpayer, as well as User's tax identification number or similar information, as required by applicable law. Users should conduct their own assessment of their tax situation concerning Digital Assets and consult their tax advisor before making any decisions with respect to investing in Digital Assets.

6. Risk of Software Weakness

The technology of Digital Assets and platforms such as smart contract systems and other related technologies, as well as their underlying technical concepts and theories are still in an early development stage, are unproven and beyond PARAMOUNTDAX's control. There is an inherent risk that the technology could contain weaknesses, vulnerabilities or bugs. These could cause, for example, the complete loss of any Digital Assets, even if the software and systems deployed by PARAMOUNTDAX are functioning as intended.

Many of these technologies and software applications required for the sale, transfer or holding of Digital Assets are neither released by a software manufacturer nor certified by a central entity such meaning no single party may be held liable for such potential defects. PARAMOUNTDAX uses and displays customary security certificates issued by third parties (certificate authorities) which are widely regarded as enhancing security. Ultimately, however, PARAMOUNTDAX cannot guarantee the validity or accuracy of these certificates on the PARAMOUNTDAX Trading Platform.

Always keeping the PARAMOUNTDAX App, internet browser and the underlying operating systems up to date can mitigate certain risks and vulnerabilities.

7. Risk of theft and internet vulnerability

The software applications and/or other technology components that support the PARAMOUNTDAX Trading Platform and Services may be exposed to electronic or physical attacks that could result in the irreversible theft or loss of Digital Assets or the theft or loss of personal data.

8. Risk of eliminating the benefits of 2FA

PARAMOUNTDAX strongly recommends that the User uses 2FA. Please note however, that the safety benefit of using 2FA is effectively reduced or eliminated if both factors can be accessed with the same credentials or devices.

9. Risk of weak login credentials and risk of losing login credentials.

If User does not use 2FA in cases provided for by PARAMOUNTDAX, any person with knowledge of User's password and e-mail address may be able to access User's Account and User's Digital Assets held in custody by PARAMOUNTDAX and may place Orders in User's name. The password User chooses when registering an Account (as amended from time to time) may be subject to attacks, even if it is unique and only known to User. The risk is greater if the password is weak (in length and/or complexity) and/or if the password contains personal details (for example User's name, date of birth or place of residence) and/or words included in a dictionary. PARAMOUNTDAX recommends that User always chooses a strong and unique password (that is not used with any other service provider) and that User uses the 2FA. While stronger passwords are statistically (far) less likely to be successfully retrieved by an attacker, no password is fully safe.

The indicator for the password strength of their password is calculated from general parameters, and does not verify whether User's password may contain any of User's personal details or words included in a dictionary. This should be regarded as a guideline only.

10. Risk of phishing and/or social engineering

SMS and e-mail services are vulnerable to spoofing and phishing attacks. User should always log into User's Account to review any transactions or required actions if they have any uncertainty regarding the authenticity of any communication or notice. Phishing attacks often occur despite SMS or e-mail or equivalent services, via search engines or ads in search engines, or other fraudulent links. While PARAMOUNTDAX strongly recommends participating in the 2FA, the 2FA cannot prevent successful phishing and/or social engineering attacks if User's credentials including the 2FA are disclosed in such an attack. Phishing or social engineering may result in the theft or loss of the User's Digital Assets.

11. Trading Services

Digital Assets are volatile assets and may be susceptible to irrational and/or rational bubbles or loss of confidence, which could collapse demand relative to supply and vice versa. This means that User may incur a material and even a full loss when investing in these assets. This risk also exists when trading stablecoins.

When User trades and places a Market Order on the PARAMOUNTDAX Trading Platform, the execution price may differ significantly from the price indicated to User on the PARAMOUNTDAX Trading Platform. This relates to a change in price between the time of the Order from User and the actual execution of the Order, which is generally referred to as ‘slippage’.

An Order from User always remains subject to sufficient liquidity on the PARAMOUNTDAX Trading Platform, which means that some Orders may not be instantly executed and that the execution may take some time or not occur at all during periods of high volatility and/or low liquidity. This could result in a less favourable price than anticipated, or even a failure to execute the transaction at User's desired price.

Additionally, illiquid markets have an increased risk of loss because they can experience higher volatility. There is no guarantee that the markets for any Digital Assets allow Users to obtain or liquidate positions at prices acceptable to them or will be even active and liquid at the time they would like to execute their investment decisions.

12. PARAMOUNTDAX Trading Platform and Trading Risks

During periods of high trading volume, illiquidity and/or volatility, interruptions and/or errors in trading may occur. This could result in limitations of the Services, including the inability to place or execute Orders. This may result in Orders or transactions being delayed, not executed at all, or executed at unfavorable prices. Additionally, we may correct any errors, for example by amending or cancelling executed Orders, which may be to your advantage or disadvantage. This may result in unexpected financial losses or missed trading opportunities.

13. Price Guarantee Service

If User has opted-in for Price Guarantee Service, User will be offered a guaranteed price which can be accepted before execution. However, User may not always be offered a guaranteed price for a given Digital Asset on the PARAMOUNTDAX Trading Platform through the Price Guarantee Service. This is contingent on various factors, including volatility and liquidity at a given time in a given market, as a result of which Orders may take longer to execute, or not execute at all. If PARAMOUNTDAX is unable to provide User with a Guaranteed Price Service, or if a Price Guarantee Order cannot be executed at the guaranteed price, PARAMOUNTDAX will notify User accordingly.

When User accepts a guaranteed price offer for their Order, User does not incur any market risk on their Order for a short period of time between User's acceptance of the price and the execution of User's Order on the RfQ segment of the PARAMOUNTDAX Trading Platform. However, to account for any unforeseen price fluctuations during this time period, the guaranteed price offer may contain a charge which will be included in the market price for the Digital Asset pertaining to User's Order. If, during the short period after User submitted their Order, the market price for User's Order changes in User's favour, User's Order will nevertheless be executed against the guaranteed price that User accepted. If User would not have submitted their Order under the Price Guarantee Service, the market price on the CLOB might have been better than the guaranteed price offered under the Price Guarantee Service. 

Currently, the only market maker available on the RFQ segment of PARAMOUNTDAX Trading Platform which responds to Price Guarantee Orders is Inveniam B.V.. Inveniam B.V. is a company affiliated with PARAMOUNTDAX. The User should note that the nature of group company relationship could give rise to potential conflicts of interest PARAMOUNTDAX endeavors to mitigate risks associated with Inveniam B.V. being the sole market maker on the RFQ segment and strives to ensure transparent, fair and competitive markets in Digital Assets. 

Further details on the conflicts of interest could be found in the Conflict of Interest Disclosure Statement.

14. No Advice

The fact that Digital Assets are available for trading on the PARAMOUNTDAX Trading Platform constitutes neither a recommendation to enter into a particular transaction nor a representation that a Digital Asset is suitable or appropriate for User. Any information PARAMOUNTDAX provides to User on the Website and/or the PARAMOUNTDAX Environment or otherwise is not intended and should not be construed as investment, financial, trading, legal, regulatory tax or accounting advice. It is indicative only, may contain third-party content, and is subject to change without notice. While we endeavour to keep information shown on the Website and/or the PARAMOUNTDAX Environment as accurate as possible, there is a risk that it may still be incomplete, outdated, or inaccurate. User is solely responsible for any investment decisions, including decisions not to trade, and for assessing the relevance, accuracy, adequacy, and reliability of any information we provide on the PARAMOUNTDAX Trading Platform and/or the PARAMOUNTDAX Environment or otherwise.

15. Custody Services

To improve the security of any Digital Assets that User deposits, the Foundation may store Digital Assets in cold wallets, also known as offline storage or cold storage, certain of which are offered by third-party custody providers. This complete isolation from online networks is the defining feature of cold wallets, designed to provide maximum security for storing Digital Assets. This may lead to a delay in the withdrawal of a Digital Asset by User. Additionally, PARAMOUNTDAX has no influence on the functionality, security, availability, and/or continuity of third-party custody provider’s services and shall not be liable for any incidents that result in loss of Digital Assets or access to Digital Assets that are not attributable to PARAMOUNTDAX. User's Accounts (including any Assets from time to time), are not guaranteed or insured against losses.

16. Transfer Services

Any transfer of a Digital Asset requires factual information from the User, and may result in a loss of that asset if that information is inaccurate. This stems from the nature of the blockchain, which essentially results in the fact that transactions cannot be reverted. It is User's responsibility to verify any contemplated transfer for accuracy at the risk of loss of User's Assets.

17. Recurring Buy

Through the Recurrent Buy feature PARAMOUNTDAX offers the optionality to periodically invest a fixed amount on an automated basis in selected Digital Assets. The main feature of Recurring Buy is that User invests consistently a fixed amount in Digital Assets on a monthly basis, regardless of the price of the relevant Digital Assets at the time of their monthly investment. This approach may reduce the risk of market timing which may potentially result in an average purchase price that is less sensitive to short-term volatility over the long term. However, this approach may also result in lower returns in comparison to a lump sum investment, if markets go up consistently in the middle to long term.

18. Staking Service

If User has opted-in for Staking Service, PARAMOUNTDAX may stake eligible Digital Assets held with the Foundation as a validator or delegator in a third-party proof-of-stake blockchain protocol or network.

The Staking Service is dependent on the functioning of underlying decentralized blockchain protocols. These protocols are maintained and regulated by specialized third parties. This means that PARAMOUNTDAX cannot retrieve, recover or sa