xStocks Risk Disclosure
This disclosure must be read together with the DigiFinex Terms of Use, TradFi Product Rules, and the Base Prospectus, product-specific Final Terms, investor notices, and other legal documents provided by Backed Assets (JE) Limited. The risks described below are not exhaustive.
1. Product and Issuer
xStocks are tokenized tracker certificates issued by Backed Assets (JE) Limited, a company established in Jersey.
Each xStock is designed to track the price and economic performance of a specified stock, ETF, or other underlying security. The products may be issued and transferred on one or more blockchain networks.
DigiFinex is not the issuer of xStocks, the underlying stocks, ETFs, or other securities.
2. No Direct Share Ownership
Purchasing or holding xStocks does not mean that you directly purchase or own shares in the relevant listed company or ETF.
You generally do not receive:
• Direct voting rights in the underlying company;
• Registration on the underlying company’s shareholder register;
• A direct right to receive dividends or other distributions;
• Shareholder information, financial reports, or corporate communications;
• A direct claim against the residual assets of the underlying company upon liquidation;
• Any right to require the underlying listed company to perform an obligation.
The underlying listed company is not the issuer of xStocks and may not sponsor, support, approve, or participate in the issuance or trading of xStocks.
3. Tracking and Return Differences
Although xStocks are designed to track the relevant stock or ETF, the trading price and final return may differ from those obtained through direct ownership of the underlying security.
Differences may result from:
• Trading spreads and platform fees;
• Issuance, redemption, deposit, withdrawal, or network fees;
• Withholding and other taxes;
• The treatment of dividend reinvestment or corporate actions;
• Rounding, valuation timing, or delayed data;
• Supply, demand, and market-maker quotations;
• Differences in trading hours;
• Trading halts, market closures, or disruption affecting the underlying market.
Where the economic effect of dividends is reflected through reinvestment, token-quantity adjustments, or another mechanism, you may not receive cash dividends directly, and the final result may be lower than the return from direct share ownership.
4. Market and Liquidity Risk
The price of xStocks and the relevant underlying securities may fluctuate significantly. Financial performance, industry events, interest rates, exchange rates, economic conditions, regulation, and market sentiment may affect prices.
A secondary market for xStocks may have insufficient buyers, sellers, or market makers. In particular, while the underlying market is closed, an xStock may trade at a price materially different from the last traded price of the underlying stock or ETF.
You may:
• Be unable to sell when required;
• Be able to sell only at a substantial discount;
• Experience significant slippage or wide spreads;
• Be unable to close a position because of a trading suspension or platform restriction;
• Lose your entire investment.
5. Collateral and Asset-Backing Risk
The issuer states that each xStock is generally collateralized on a 1:1 basis by the corresponding underlying asset. The relevant shares, cash, or other assets may be held by custodians, banks, brokers, or other depositary institutions.
However, 1:1 collateralization does not mean:
• Your principal is guaranteed;
• The product is insured by a government or bank;
• You directly own the collateral shares;
• You can always take delivery of the underlying shares;
• The collateral can always be sold immediately;
• The issuer or depositary institution cannot become insolvent.
Collateral reports or asset attestations may involve timing differences and may not immediately reflect unsettled transactions, fees, taxes, corporate actions, or operational adjustments.
6. Issuer, Custody, and Counterparty Risk
Holding xStocks exposes you to the credit, financial, technology, operational, and insolvency risks of Backed Assets (JE) Limited.
You may also be exposed to:
• The credit risk of institutions holding the underlying shares, cash, or digital assets;
• Default by a broker, bank, custodian, or other counterparty;
• Freezing, seizure, or unavailability of the underlying assets;
• Disputes concerning custody or ownership records;
• Delays in cross-border insolvency or claims proceedings;
• Failure by the issuer to perform redemption or payment obligations.
A bankruptcy-remote or asset-segregation arrangement does not guarantee full or immediate payment in every circumstance.
7. Redemption Risk
Certain eligible holders may be permitted to redeem xStocks with the issuer under the issuer’s terms. DigiFinex does not guarantee that it will provide or facilitate direct redemption.
Redemption may be subject to:
• KYC, anti-money laundering, and sanctions screening;
• Location and investor-eligibility requirements;
• Minimum redemption amounts;
• Fees, taxes, and network costs;
• Settlement cycles and underlying-market hours;
• Availability of the relevant assets and cash;
• The operational status of the issuer and depositary institutions.
The redemption value may be lower than the price you paid and may also be lower than the value obtainable through direct ownership of the underlying shares.
8. On-Chain Transfer and Legal Restrictions
The technical ability to transfer xStocks on a blockchain does not mean that they may legally be transferred without restriction to every person or jurisdiction.
Users must comply with:
• Applicable securities laws and resale restrictions;
• Rules concerning U.S. persons and other restricted persons;
• Sanctions and restricted-jurisdiction requirements;
• Eligibility conditions in the issuer documents;
• DigiFinex location and account restrictions.
A transfer to an ineligible person, restricted address, or unsupported platform may result in the product being frozen, rejected for deposit, unavailable for trading, or ineligible for redemption.
9. Smart-Contract, Blockchain, and Self-Custody Risk
xStocks rely on blockchain networks and smart contracts. Withdrawal to an external wallet creates additional self-custody risk.
Risks include:
• Smart-contract vulnerabilities, coding errors, or attacks;
• Network congestion, forks, outages, or protocol changes;
• Contract upgrades or termination of network support;
• Failure of bridges, wallets, or third-party protocols;
• Loss of private keys, recovery phrases, or devices;
• Use of an incorrect address, network, or token contract;
• Unauthorized wallet signatures or malicious approvals;
• Irreversibility of blockchain transactions.
DigiFinex will generally be unable to recover assets transferred to an incorrect address, unsupported network, or third-party protocol.
10. Corporate-Action Risk
Dividends, stock splits, reverse splits, mergers, acquisitions, spin-offs, rights offerings, liquidations, trading halts, and delistings may affect the price, quantity, redemption terms, or trading status of xStocks.
The treatment and timing may be determined by the issuer, depositary institutions, and relevant service providers and may differ from the treatment received by direct shareholders. Trading, deposits, withdrawals, or redemptions may be suspended during processing.
11. Regulatory and Tax Risk
xStocks may be classified as securities, tracker certificates, structured products, financial instruments, or other regulated assets in different jurisdictions.
Legal or regulatory changes may result in:
• Product access being terminated in certain regions;
• Additional KYC or investor-eligibility requirements;
• Restrictions on transfers, deposits, withdrawals, or redemption;
• Trading suspension or delisting;
• Changes to the product structure, fees, or conditions.
Users are responsible for determining the applicable legal and tax treatment and for any income, capital-gains, withholding, or other taxes.
12. Role of DigiFinex
DigiFinex provides relevant trading, custody, deposit, withdrawal, or technical services in accordance with its platform rules. DigiFinex:
• Is not the issuer of xStocks, the underlying shares, or ETFs;
• Does not control Backed Assets, depositary institutions, or underlying listed companies;
• Does not guarantee performance by the collateral, issuer, or counterparties;
• Does not guarantee tracking accuracy, liquidity, or redemption;
• Does not provide investment, legal, or tax advice;
• May restrict services, adjust parameters, suspend trading, or delist a product for legal, regulatory, risk-management, liquidity, or technical reasons.
13. Acknowledgment and Acceptance
By trading or holding xStocks, you confirm that:
• You have read the relevant Base Prospectus and product-specific Final Terms;
• You understand that xStocks do not represent direct share ownership;
• You understand issuer, custody, liquidity, technology, and regulatory risks;
• You may lose some or all of your invested funds;
• You satisfy all applicable location and investor-eligibility requirements;
• You accept all risks relating to trading, holding, transferring, withdrawing, and redeeming xStocks.
This document does not constitute investment, legal, or tax advice. Before trading, you should independently assess whether the product is appropriate for your financial circumstances, investment objectives, and risk tolerance.
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