Risk Summary

TransFi Crypto Risk Summary

The Financial Conduct Authority (FCA) categorizes cryptoassets as high-risk investments due to the potential for significant losses. Investments in crypto-assets are not protected by the Financial Services Compensation Scheme (FSCS), and their value can fluctuate significantly.

Key Risks to Consider

1. You could lose all the money you invest

• Cryptoasset values can be highly volatile, with rapid fluctuations in value. Be prepared to lose all the money you invest.
• The cryptoasset market is largely unregulated, increasing risks such as cyber-attacks, financial crime, and firm failures.

2. You should not expect to be protected if something goes wrong

• The Financial Services Compensation Scheme (FSCS) does not cover investments in cryptoassets, as they are not classified as 'specified investments' under the UK regulatory framework. Learn more by using the FSCS investment protection checker here
• The Financial Ombudsman Service (FOS) may not be able to address complaints related to these investments. Learn more about FOS protection here

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

• Selling cryptoassets may not be possible at your preferred time due to market demand and supply factors. 
• Operational issues, such as platform outages or cyber-attacks, may delay your ability to sell at the desired time.

4. Cryptoasset investments can be complex

• The intricate nature of cryptoassets can make it challenging to fully grasp the associated investment risks.
• Conduct thorough research before investing. If an opportunity seems too good to be true, it likely is.​ 

5. Diverse Risks Across Cryptoassets

• Not all cryptoassets carry the same level of risk. Some, like algorithmic stablecoins, may experience significant instability.
• Ensure you understand the specific risks of any cryptoasset before investing.

6. Specific Cryptoasset Risks:

Stablecoins:

• May not consistently maintain a 1:1 peg to their underlying asset, leading to value fluctuations.​
• Their value depends on issuer reserves, regulatory status, and market conditions.​

Decentralized Finance (DeFi) Tokens:

• Prices are highly volatile and often tied to experimental or unproven protocols.​

• Smart contract vulnerabilities may lead to loss of funds.​

Memecoins:

• Highly speculative and prone to extreme price swings due to hype and social media trends.​

• Lack intrinsic utility, making their long-term value uncertain.​

Staked Assets:

• Lock-up periods may prevent access to funds for a set duration.​
• Slashing penalties could result in the loss of staked funds due to network rules.​

Loss of Keys to Non-Custodial Wallets:

• Losing private keys or recovery phrases means losing access to funds permanently.​

• No third party, including the wallet provider, can recover or restore lost wallets.

7.  Don’t put all your eggs in one basket

• Concentrating your investments in a single asset class is risky. Diversify to reduce reliance on any one investment.
• A good rule of thumb, limit high-risk investments, such as cryptoassets, to no more than 10% of your total investment portfolio. Learn more here.

Further Information

For tips on safeguarding your investments and detailed guidance on cryptoassets, visit the FCA’s website here.

By understanding and considering these risks, you can make more informed decisions about investing in cryptoassets through TransFi.

The risks of different cryptoasset products
Not all cryptoassets are alike. Before investing, you should ensure you understand the specific risks involved. To learn about the risks of certain cryptoassets, please click here.