Risk Disclosure

Risk Disclosure

Version 6.0 – February 2025

1. Information about the company

Zillion Bits Ltd (the “Company”, “ZBX” or “we”) is a private limited liability company incorporated and registered in Malta under company registration number C 88757. The Company’s registered office is situated at Level 3 (Suite 2267), Tower Business Centre, Tower Street, Swatar, Birkirkara BKR 4013, Malta.

The Company may be contacted via email at [e-mail], the link to the Company’s website is: https://www.zbx.com/.

2. Regulation

The Company is licensed by the Malta Financial Services Authority (“MFSA”) as a crypto-asset service provider (the “CASP”) under the Markets in Crypto Assets (MiCA) Act in Malta and the EU MiCA Regulation.

The Company provides crypto-asset services in accordance with the authorisation issued in its favour by the MFSA on 05 February 2025. A copy of the Licence is available upon request. You may also refer to the MFSA’s online financial services register for further details.

3. Services which may be offered by ZBX

The Company is authorised to provide the following crypto-asset services:

(a) Providing transfer services for crypto-assets on behalf of clients,

(b) Placing of crypto-assets,

(c) Execution of orders for crypto-assets on behalf of clients,

(d) Reception and transmission of orders for crypto-assets on behalf of clients,

(e) Providing custody and administration of crypto-assets on behalf of clients,

(f) Exchange of crypto-assets for funds,

(g) Exchange of crypto-assets for other crypto-assets, and

(h) Operation of a trading platform for crypto-assets.

The crypto-asset service(s) which will be provided to the client will be set out in the relevant client agreement which will be concluded between the Company and the client prior to the provision of a crypto-asset service.

4. Crypto-assets offered by ZBX

You can obtain information on the crypto-assets available on the ZBX platform on our website. ZBX reserves the right to add and/or remove the crypto-assets listed on its platform from time to time.

5. Risk disclosures

All financial transactions involve a degree of risk and may result in losses to the client’s capital. Crypto-assets are highly risky and may be riskier, less liquid, more volatile, and more vulnerable to economic, political, market, industry, regulatory and other changes than traditional financial instruments. Besides, the nature of crypto-assets exposes them to an increased risk of fraud or cyberattack.

You should exercise caution in relation to the crypto-asset products and should not enter into transactions unless you fully understand their nature, and the risks associated with them and can bear any potential financial losses including potentially the total loss of funds. 

The below list of risks is of a generic nature and is also intended to describe various risk factors associated with crypto-assets. This Risk Disclosure is not intended to provide an exhaustive list of risks (or other important factors) associated with an investment in a crypto-asset, and hence there may be other considerations which should be taken into account before engaging in crypto-asset services. You should therefore refrain from relying exclusively on the risk disclosures set out below as covering all possible risks and should always independently verify that the crypto-asset services or transactions are suitable for you (or, if applicable, your principal) in light of your specific circumstances.

You must make your own independent decision to access or use the crypto-asset services and should seek any advice that you consider necessary or desirable (including financial, tax and/or legal advice) from independent advisors (see section “Not Financial Advice” section below).

Trading risk

There can be no assurance that the use of the crypto-asset services will provide a positive return or profit, that significant losses will not be incurred, or that your objectives will be achieved. The past performance of assets is not a reliable indicator of future results. If you decide to deal in crypto-assets, you should be aware that you could lose a large amount, or even all, of the money invested. 

ZBX will make the best efforts to choose high-quality crypto-assets and provide reliable crypto-asset services but will not be responsible for trading losses. You must trade with caution and never risk more than what you can afford to lose.

Depending on the underlying technology and the features of particular crypto-assets, transactions in crypto-assets might be irreversible. Consequently, losses due to accidental or erroneous transactions may not be recoverable.

Volatility risk

The price of a crypto-asset is based on its perceived value and is subject to changes in sentiment, which makes the price of these products highly unpredictable and volatile when compared to financial instruments such as stocks and bonds. The extreme volatility and unpredictability of the price of a crypto-asset relative to fiat currencies may result in a total loss of the investment over a short period of time.

Several factors may affect the price of crypto-assets, including, inter alia: (a) the total number of crypto-assets in existence, (b) global demand and supply, (c) interest rates and currency exchange rates, including the rates at which crypto-assets may be exchanged for fiat currencies, (d) fiat currency withdrawal and deposit policies of CASPs and liquidity of such CASPs, (e) cyber theft of crypto-assets from online digital wallet providers, or news of such theft from such providers or from individuals’ digital wallets, (f) regulatory measures, if any, that restrict the use of crypto-assets as form of payment or the purchase of crypto-assets on the market, (g) the availability and popularity of business that provide crypto-assets-related services, (h) increased competition from other forms of crypto-assets or payments services, (i) global or regional political, economic or financial events and situations, and (j) fees associated with processing a crypto-asset transaction. 

Certain crypto-assets have experienced daily price volatility of more than 20%. Besides, crypto-asset markets are open 24 hours a day, 7 days a week. As a result, rapid price changes might occur at any time, including outside of normal business hours.

Therefore, there is a high volatility risk and holders may suffer large losses. You should not deal in crypto-assets unless you understand their nature and the extent of your exposure to risk.

Valuation risk

Crypto-assets can be traded through privately negotiated transactions and through numerous CASPs and intermediaries around the world, each with its own pricing mechanism and/or order book. The lack of a centralised pricing source poses a variety of valuation challenges. There is therefore a risk that investors will not receive a fair and accurate price when buying or selling crypto-assets.

The value of a crypto-asset may be derived from the continued willingness of market participants to exchange fiat currency for a crypto-asset, which means that the value of a particular crypto-asset may be completely and permanently lost should the market for that crypto-asset disappear. There is no assurance that a person who accepts a crypto-asset as payment today will continue to do so in the future.

Liquidity risk

The liquidity of the crypto-asset market will depend on, inter alia, supply and demand and the commercial and speculative interest in the market for these products. Thinly traded or illiquid markets have a potentially increased risk of loss because they can experience high volatility of prices, and, in such markets, market participants may find it impossible to liquidate market positions except at very unfavourable prices. Also, the lack of liquidity in any market for crypto-assets may result in delays in order execution and some orders may not be executed at all; these effects may be exacerbated where an order is larger. There is no guarantee that the markets for any crypto-assets will be active and liquid or permit you to establish or liquidate positions when desired or at favourable prices.

Political, legal and regulatory risk 

The performance of a crypto-asset or the possibility to purchase, sell, or repurchase may be affected by changes in general economic conditions and uncertainties such as political developments, changes in government policies, laws, or regulations (including regarding taxation), the imposition of restrictions on the transfer of capital and changes in regulatory requirements. 

The regulatory environment concerning crypto-assets and other digital assets continues to develop and legislative and regulatory changes may adversely affect the use, transfer, exchange and value of crypto-assets. The application and interpretation of existing laws and regulations are often largely untested and there is a lack of certainty as to how they will be applied. New laws and regulations will be promulgated in the future that apply to blockchain technology, digital assets, and related service providers and no assurance can be given that any such changes will not adversely affect crypto assets or the crypto-asset services. 

It is not possible to predict how such changes would affect the price and liquidity of crypto-assets or the availability and characteristics of crypto-asset services. Regulatory actions could negatively impact crypto-assets and other digital assets in various ways, including, for purposes of illustration only, through a determination (with retrospective or prospective effect) that crypto-assets are regulated financial instruments requiring special registration or licensing in certain jurisdictions.

It remains your responsibility to ascertain whether you are legally permitted to use the services of ZBX in your jurisdiction.

Operational disruptions and settlement risk

Some crypto-asset transactions may be deemed to be executed only when recorded and confirmed by the platform operator, which may not necessarily be the time at which the client initiates the transaction.

Some CASPs have suffered severe operational incidents, such as trading or settlement disruptions. During these disruptions, consumers have been unable to buy and sell crypto-assets at the moment they intended to and have suffered losses due to the price fluctuation of crypto-assets held during the period of disruption.

Lack of exit options risk

Investors are at risk of being unable to trade in crypto-assets or exchange them for traditional fiat currencies for a long period of time. Investors may therefore suffer losses in the process.

Systemic risk

Since the market for crypto-assets is still very small compared to other market segments, a problem in one of the crypto-assets can impact the market value of the entire crypto-assets market. The value of different crypto-assets is still strongly correlated. A negative impact on any crypto-asset can have an impact on the value of another.

Opaque spot market risk

Crypto-asset balances are generally maintained as an address on the blockchain and are accessed through private keys, which may be held by a market participant or a custodian. Although crypto-asset transactions are typically publicly available on a blockchain or distributed ledger, the public address does not identify the owner, controller or holder of the private key. This poses asset verification challenges for market participants, regulators and auditors and gives rise to an increased risk of manipulation, fraud and money laundering, including the potential for Ponzi schemes, bucket shops and pump and dump schemes, which may undermine market confidence in a crypto-asset and negatively impact its price.

Crypto-asset trading platforms, intermediaries and custodians

Crypto-asset trading platforms, as well as other intermediaries, custodians and vendors used to facilitate crypto-asset transactions, are relatively new and might be unregulated in some jurisdictions. The opaque underlying spot market and lack of regulatory oversight create a risk that a CASP may not hold sufficient crypto-assets and funds to satisfy its obligations and that such deficiency may not be easily identified or discovered. In addition, many CASPs have experienced significant outages, downtime and transaction processing delays, and flash crashes, and may have a higher level of operational risk than traditional investment services providers. In some cases, it may be difficult to identify and/or locate the issuer of a crypto-asset, the trading platform, wallet provider or intermediary, especially in a cross-border situation where it may also be difficult to determine which laws may be applicable. Thus, if a holder has a claim, it might be difficult to sue the issuer or the wallet provider and enforce a title.

Lack of customer protection risk

Crypto-assets are not money, fiat currency or legal tender and are not backed by the government and authorities. They may or may not be considered “property” under the law of different jurisdictions, and such legal uncertainty may affect the nature and enforceability of a client’s interest in such a crypto-asset.

The protection offered by investor compensation schemes in many jurisdictions might not apply to transactions involving crypto-assets irrespective of the nature of the tokens.

Transactions in crypto-assets may be irreversible, and, accordingly, losses due to fraudulent or accidental transactions may not be recoverable.

Technology risk

Crypto-asset networks’ functionality relies on technology. The relatively new and rapidly evolving technology underlying crypto-assets introduces unique risks. Technological disruptions may affect crypto-asset operations, which may adversely affect the crypto-asset industry. The nature of crypto-assets means that any technological difficulties experienced by the platform operator may prevent clients from accessing their crypto-assets.

For example, a unique private key is required to access, use or transfer a crypto-asset on a blockchain or distributed ledger. The loss, theft or destruction of a private key may result in an irreversible loss of crypto-assets associated with this private key.

While using the ZBX website and/or applications, system errors may occur. Risks associated with utilising the Internet-based trading system include but are not limited to the failure of hardware, software, and Internet connections. Risks resulting from any system failure could mean that orders may be delayed or fail.

When sending any information to ZBX it should be remembered that any electronic communications can fail, can be delayed, may not be secure and/or may not reach the intended destination.

Cybersecurity risk

Crypto-assets involve the storage and transmission of investors’ proprietary information, and security breaches could cause a risk of loss or misuse of this information, and of resulting claims, fines and litigation. The crypto-assets may be subject to a variety of cyber-attacks, which may continue to occur from time to time. 

An attack or a breach of security could result in a substantial, immediate and irreversible loss for market participants that trade in crypto-assets, including through the loss of private data, unauthorized trades, an interruption in potential trading for an extended period of time, significant legal and financial exposure, damage to reputation, and a loss of confidence in security measures, any of which could have a material adverse effect on the financial results and business of the issuer of the crypto-asset. 

Attackers can also manipulate the crypto-asset market. Moreover, markets for crypto-assets might not be subject to effective oversight or might be supervised by regulators that impose minimum financial or business conduct standards, or that require minimum cybersecurity protections. As a result, attackers can target CASPs operating specifically in such vulnerable markets. 

A minor cybersecurity event in a crypto-asset is likely to result in downward price pressure on that product and potentially other crypto-assets.

Transaction fees risk

Many crypto-assets allow market participants to offer miners (i.e., parties that process transactions and record them on a blockchain or distributed ledger) a fee. While not mandatory, a fee is generally necessary to ensure that a transaction is promptly recorded on a blockchain or distributed ledger. The amounts of these fees are subject to market forces and it is possible that the fees could increase substantially during a period of stress. In addition, crypto-asset trading platforms, wallet providers and other custodians may charge high fees relative to custodians in many other financial markets.

Insufficient, inaccurate and/or misleading information disclosure risk

Information regarding any specific crypto-asset may be missing, inaccurate, incomplete and/or unclear with respect to the project and its risks. Documents may be highly technical and require sophisticated knowledge to understand the characteristics of a particular crypto-asset. Besides, the offering documents or product information provided by the issuers of some of the crypto-assets might not have been subject to scrutiny by any regulatory body.

Third-party risk

Third parties may be involved in the provision of ZBX services. These may include payment service providers, electronic money institutions, custodians, market makers and banking partners. You may be subject to the terms & conditions of these third parties and ZBX may not be liable for any loss that these third parties may cause to you.

ZBX will carry out the necessary due diligence and third-party risk analysis and assessments where feasible and information is available to ensure this risk is mitigated as much as possible. However, ZBX cannot fully eliminate risks emanating from the involvement of third parties.

Money laundering and funding of terrorism risk

The world of crypto-assets presents specific money laundering (ML) and financing of terrorism (FT) risks. Given the decentralized and partially anonymous nature of many crypto-assets, there's a potential for them to be used in illicit activities, as traditional tracking and regulatory measures can be evaded. Additionally, the global reach of crypto-assets, coupled with a lack of standardized regulations across countries, makes it challenging for authorities to oversee and control potentially suspicious transactions. 

As a result, ZBX is exposed to ML/FT Risk due to the associated characteristics of crypto-assets being pseudo-anonymity, immediacy, irrevocability and decentralisation. This new financial frontier requires robust countermeasures, including enhanced due diligence, to ensure it isn't exploited for illicit purposes. 

ZBX is licensed in a reputable jurisdiction with a robust crypto-asset framework in place and is subject to various rules and regulations including those relating to combatting ML/FT. Hence these risks are controlled and mitigated through a robust AML/CFT framework implemented by the Company which includes ML/FT risk assessments, customer due diligence (CDD), transaction monitoring, reporting of suspicious transactions, and other relevant measures. 

ZBX does not admit to trading on its platform any crypto-assets which have an inbuilt anonymization function unless the holder and transaction history of the crypto-asset can be identified.

6. No financial advice

ZBX does not offer financial advice and no communication or information provided to you by ZBX is intended as or shall be considered as, investment, financial, tax or trading advice, or any other sort of advice. Furthermore, ZBX does not assess whether its crypto-asset services or specific crypto-assets are suitable or appropriate for the respective client.

Thus, the use of the crypto-asset services is at your own risk. You should consider whether any investment or transaction is appropriate according to your personal investment objectives, financial circumstances and risk tolerance. 

In case you do not feel confident in making your own independent decisions in relation to our crypto-asset services you should seek advice (including financial, tax and/or legal advice) from independent advisors before deciding to use crypto-asset services. 

7. No-solicitation

Our website and other publicly available material and information on our services are provided for information purposes only and do not constitute an offer or solicitation to enter into any contract or agreement with us for our services or to invest in any crypto or other assets.

You acknowledge that your arrival to and use of our website, mobile applications and other platforms and any of your requests for any information or to obtain our services are wholly unsolicited and are made entirely out of your own initiative and not a direct consequence of any prior direct communication from us.

8. Restricted access

The ZBX services and information contained in our website, mobile applications, and other publicly available material (i) are not directed at you if ZBX is prohibited by any law of any jurisdiction from making such services and information available to you and (ii) are not intended for any use that would be contrary to local law or regulation. 

ZBX is putting every effort into maintaining technological measures to restrict access to our services, website, mobile applications, and other publicly available material from such jurisdictions. However, persons who are residents outside Malta should consult their professional advisers or local regulators to satisfy themselves with local regulatory restrictions with respect to crypto-asset services.

9. Customers residing in the United Kingdom

Due to amendments in the UK financial promotions regime that came into effect on October 8, 2023, additional requirements are imposed on crypto-asset service providers to inform customers of risks related to crypto-assets. 

Don’t invest in crypto-assets unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong.

Due to the potential for losses, the UK Financial Conduct Authority (FCA) considers investment in crypto-assets to be high risk.

What are the key risks?

1) You could lose all the money you invest

i. The performance of most crypto-assets 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 crypto-assets.

ii. The crypto-asset market is largely unregulated. There is a risk of losing money or any crypto-assets 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

i. 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.

ii. Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.

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

i. There is no guarantee that investments in crypto-assets can be easily sold at any given time. The ability to sell a crypto-asset depends on various factors, including the supply and demand in the market at that time.

ii. Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delays and you may be unable to sell your crypto-assets at the time you want.

4) Crypto-asset investments can be complex

i. Investments in crypto-assets can be complex, making it difficult to understand the risks associated with the investment.

ii. You should do your own research before investing. If something sounds too good to be true, it probably is.

5) Don’t put all your eggs in one basket

i. 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.

ii. A good rule of thumb is not to invest more than 10% of your money in high-risk investments.

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

For further information about crypto-assets, visit the FCA’s website here.