RISK DISCLOSURE STATEMENT – TRANSFER AND SETTLEMENT SERVICES

INTRODUCTION

This Risk Disclosure Statement (the “Statement”) is provided to you, the client, by MidChains FZE (the “Firm”), a Virtual Asset Service Provider (“VASP”) providing licensed broker-dealer services in Dubai, in accordance with the regulations of the Virtual Assets Regulatory Authority (“VARA”). This Statement outlines the potential material risks associated with virtual asset (VA) transfer and settlement services offered by MidChains FZE.

Trading and investing in virtual assets is inherently risky and may result in financial loss. It is important that you fully understand the risks involved with virtual asset trading and investing before deciding to execute any virtual asset trades. This Risk Disclosure Statement is not a complete statement of all risks involved in virtual asset trading. It is your responsibility to educate yourself as to all risks applicable to virtual asset trading and investing. Virtual asset trading and investing involves risk to your capital, including the risk that the entire amount invested may be lost. You should always ensure that you have adequate financial resources to bear the risks involved in virtual asset trading and investing and that you monitor your positions carefully. You should not invest, trade or risk money or value that you cannot afford to lose.

This risk disclosure statement cannot and does not disclose all risks and other aspects involved in holding and trading virtual assets, but sets out some of the principal risks involved with virtual asset trading and investing:

RISKS INVOLVED

• Market Risks: Trading in VA involves significant risks, including market fluctuations, which can result in losses. The value of your VA can fluctuate rapidly and unpredictably, and there is no guarantee that the value of your VA will increase.
• Liquidity Risks: The VA market can experience periods of low liquidity, making it difficult to sell or buy VA at desired prices. This can result in losses if you are unable to sell or buy VA at your desired price.
• Legal Risk: The legal status of certain virtual assets may be uncertain. This can mean that the legality of holding or trading them is not always clear. Whether and how one or more virtual assets constitute property, or assets, or rights of any kind may also be uncertain and different legal treatments may be applied to the same virtual asset by courts in different jurisdictions. Participants are responsible for knowing and understanding how virtual assets will be addressed, regulated, and taxed under applicable law.
• Settlement Risks: Settlement risks arise when there are delays or failures in the transfer of VA and/or cash between parties. This can result in losses if you are unable to receive or deliver VA and/or cash on time.  In addition, VA transactions may not be finalised until recorded on the relevant DLT for the VA, which may not be the time or date that the client initiates the transmission or transfer, and/or settlement
• Trading Risk: In addition to liquidity risks, values in any virtual asset market are volatile and can shift quickly. Participants in any virtual assets market are warned that they should pay close attention to their position and holdings, and how they may be impacted by sudden and adverse shifts in trading and other market activities.
• Counterparty Risks: Trading in VA involves counterparty risks, where the other party to the transaction may default on their obligations. This can result in losses if the other party fails to deliver or pay for VA.
• Fraud Risk: VA transactions may be irreversible, meaning any losses suffered because of fraud or an accidental or unauthorised transaction may not be recoverable
• System and Technology Risks: The transfer and settlement services rely on computer systems and technology. The VA may experience technical difficulties unrelated to actions by the Firm that may in turn impact the client’s ability to access or use the VA for transmissions or transfer, and/or settlements. Any failures or disruptions in these systems can result in delays or losses.
• Regulatory Risks: The VA market is subject to regulatory changes, which can impact the value of your VA. Regulatory changes can also result in additional costs or restrictions on your trading activities.
• Risks related to Virtual assets: The further development and acceptance of virtual assets is subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of virtual assets may adversely affect your investments in one or more virtual assets. The use of virtual assets to, among other things, buy and sell goods and services, or to serve as the basis for other virtual assets to facilitate transactions or services (including DeFi financial transactions), is part of the new, experimental and rapidly evolving virtual asset industry. Some virtual assets, such as Bitcoin and Ethereum are more prominent than other parts of this industry. (e) The growth of this industry is subject to a high degree of uncertainty. The factors affecting the further growth and development of this industry, include, but are not limited to: (a) continued worldwide growth in the adoption and use of virtual assets; (b) government and quasi-government regulation of virtual assets and their use, or restrictions on or regulation of access to and operation of virtual asset networks; (c) changes in consumer demographics and public tastes and preferences; (d) the maintenance and development of the open-source software protocol of the virtual asset networks; (e) the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies; (f) the further development of “second-layer” applications and scaling solutions; and (g) general economic conditions and the regulatory environment relating to Virtual assets, and negative consumer or public perception of virtual assets.

YOUR RESPONSIBILITIES

• Understand the Risks: You are responsible for understanding the risks involved in trading in VA and the transfer and settlement services offered by MidChains FZE.
• Monitor Your Accounts: You are responsible for monitoring your accounts regularly to ensure that your VA and cash are accurately reflected.
• Comply with Regulations: You are responsible for complying with all applicable regulations and laws related to trading in VA and the transfer and settlement services.
• You are advised to read and understand the risks involved in trading and custody of Virtual Assets.
• You will also need to read the whitepaper and any other offering memorandum associated with Virtual Asset issuances.
• While most of the Virtual Assets which MidChains will broker are expected to be real world asset backed Virtual Assets, there is a risk of volatility and unpredictability of the price of Virtual Assets relative to fiat currencies.
• Trading in Virtual Assets may be susceptible to irrational market forces and there is a risk of increased risk of Financial Crime.
• The nature of Virtual Assets may lead to an increased risk of cyber-attack and there may be limitations around mechanisms for the recovery of lost or stolen Virtual Assets.

YOU ARE HEREBY NOTIFIED, ACCEPT AND CONFIRM YOUR UNDERSTANDING THAT VIRTUAL ASSETS:

a. may lose their value in part or in full;
b. may not always be transferable;
c. may not be liquid; and
d. may be subject to fraud, manipulation, theft, including through hacks and other targeted schemes, and loss.
e. there is no assurance that you will be able to sell Virtual Assets.

LIABILITY

MidChains FZE shall not be liable for any losses or damages resulting from the risks outlined above. You acknowledge that you have read and understood this Risk Disclosure Statement and agree to hold MidChains FZE harmless for any losses or damages resulting from the risks outlined above.

ACKNOWLEDGEMENT
By using the transfer and settlement services offered by MidChains FZE, you acknowledge that you have read and understood this Risk Disclosure Statement and agree to the terms and conditions outlined above.
In addition to the provisions of this disclosure statement, we may make additional disclosures from time to time or amend this statement in accordance with the requirements set out in VARA Broker-Dealer Services Rulebook, Market Conduct Rulebook and Compliance and Risk Management Rulebook.

CHANGES TO OUR RISK AND DISCLOSURE STATEMENT

Any changes we may make to our Risk and Disclosure Statement in the future will be posted on this page and, where appropriate, notified to you by e-mail. Please check back frequently to see any updates or changes.

CONTACT

Questions, comments and requests regarding this Risk Disclosure Statement should be sent to [email protected]

Responsible Individuals:

1. Basil Al Askari – Co-founder & CEO
2. Daniya Arinova – Head of Compliance