Risk Summary
This summary explains the key risks of investing in cryptoassets. Please read it carefully before proceeding.
Don't invest unless you're prepared to lose all the money you invest.
This is a high-risk investment and you should not expect to be protected if something goes wrong.
What is a Cryptoasset?
A cryptoasset is a digital asset that uses cryptography and is typically built on blockchain or distributed ledger technology. BSKTs (basket tokens) are ERC-7621 tokens - a new standard built on top of ERC-721 - that hold a portfolio of ERC-20 digital assets inside them. Like all cryptoassets, they are volatile, complex, and carry significant risk.
1. You Could Lose All Your Money
The value of cryptoassets is extremely volatile. Prices can fall rapidly and without warning. You may not be able to sell your cryptoassets when you want to, or you may have to sell at a significant loss. You should be prepared to lose the entire amount you invest.
2. You Should Not Expect to Be Protected
The Financial Services Compensation Scheme (FSCS) does not protect cryptoasset investments. If something goes wrong - for example, if the platform fails, if you fall victim to fraud, or if you lose access to your tokens - you will not be able to make a claim to the FSCS.
The Financial Ombudsman Service (FOS) will also not be able to consider complaints related to cryptoassets.
3. You May Not Be Able to Sell When You Want To
Some cryptoassets may have limited liquidity, meaning there may not be enough buyers when you want to sell. Decentralised exchanges may not always have sufficient liquidity for all tokens. In extreme market conditions, you may be unable to exit your position at a reasonable price, or at all.
4. Smart Contract and Technical Risks
Cryptoassets operate on smart contracts - computer code that executes automatically on the blockchain. Smart contracts can contain bugs or vulnerabilities that may result in loss of funds. While the Alvara Protocol has undergone security audits, no audit can guarantee the absence of all vulnerabilities.
Additional technical risks include:
- Loss of private keys - If you lose your wallet credentials, your assets cannot be recovered
- Cyberattacks - Hacking, phishing, and other attacks can result in theft of your assets
- Network failures - Blockchain network congestion or downtime may prevent you from executing transactions
5. Insolvency Risk
There is no guarantee that any entity associated with the platform or protocol will continue to operate. If a service provider becomes insolvent, you may lose access to your assets. Decentralised protocols also carry risks related to governance decisions and protocol upgrades that could adversely affect your holdings.
6. Regulatory Risk
The regulation of cryptoassets is evolving rapidly. Governments and regulators may introduce new rules that affect the legality, availability, or value of cryptoassets. This could include restrictions on trading, additional tax obligations, or outright bans in certain jurisdictions.
7. 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 can reduce your overall risk. As a general guideline, you should not invest more than 10% of your net assets in high-risk investments such as cryptoassets.
8. Tax Implications
In the UK, Capital Gains Tax (CGT) may apply when you dispose of cryptoassets. Income Tax may also apply in certain circumstances. Tax rules can change, and your individual circumstances will determine the tax treatment of your cryptoasset activities. You should seek independent tax advice.
If You're Unsure, Seek Professional Advice
If you are uncertain about whether cryptoassets are right for you, you should consult an independent financial adviser. A qualified adviser can assess your personal financial situation and risk tolerance to help you make an informed decision.
Remember: Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong.