HKDAP Risk Factors

These Risk Factors set out some of the principal risks associated with HKDAP and the services that we provide in connection with HKDAP. This is not an exhaustive list, and does not purport to describe every risk. By obtaining, holding or using HKDAP, you acknowledge that you have read and understand these Risk Factors. You should not obtain, hold or use HKDAP unless you understand the associated risks.

These Risk Factors form part of the HKDAP terms and conditions (the “Terms”). It has the same force and effect as if expressly set out in the body of the Terms, and any reference to the Terms shall include these Risk Factors.

Unless otherwise expressly defined herein, capitalised terms in these Risk Factors shall have the same meaning as ascribed to them in the Terms.

A copy of these Risk Factors is available on our Site.

1. Market risk

1.1 The Market price of HKDAP may fluctuate due to factors outside our control. Whilst Customers may from time to time redeem HKDAP for HKD at par value in accordance with the Terms, we do not guarantee HKDAP will always trade in the Market at par value. We do not and cannot control how third parties value HKDAP, and we are not responsible or liable in any way for Losses arising from fluctuations in the Market price of HKDAP.

1.2 For the purposes of these Risk Factors, “Market” means any transaction relating to HKDAP other than issuances and redemptions of HKDAP by us in accordance with the Terms.

2. Liquidity Risk

2.1 There is no guarantee that there will always be an active Market for you to purchase or dispose of HKDAP. Trading exchanges or Markets may list HKDAP and may delist HKDAP from trading without prior notice to or consent by you. It is possible that any Market for HKDAP could abruptly cease. We are not in any way obliged to provide liquidity for HKDAP in the Market or to act as a Market maker in respect of HKDAP.

2.2 The liquidity of HKDAP in certain Markets may be limited, and less liquid or illiquid Markets could experience greater volatility in the Market price of HKDAP. As such, you may not always be able to purchase, exchange or sell HKDAP in the Market at your desired price and volume.

2.3 Merchants and other commercial parties who accept HKDAP for their goods and services do so at their sole discretion, and, in the future, may cease to accept HKDAP or value them at less than their par value.

3. Reserve Assets risk

3.1 The valuation of the Reserve Assets may involve certain judgments, estimates, assumptions and uncertainties. Independent pricing information regarding the Reserve Assets may not always be available, and may require assumptions to be made as to trading conditions and estimates to be made as to fair value. Published information regarding the valuation of the Reserve Assets may be adversely affected if actual circumstances differ from those on which the estimates and the assumptions are based, and the Reserve Assets could be subject to diminution in value if the estimates or the assumptions prove to be incorrect.

3.2 We may, from time to time, at our sole discretion, invest (or direct the investment of) the Reserve Assets in such assets as are permitted under applicable Laws, taking into account our Reserve Assets management, risk management and other policies. There is no guarantee that the liquidity of the Reserve Assets will always be sufficient to meet redemption requests as and when made, and it is possible redemption of HKDAP may be deferred or suspended in certain circumstances.

3.3 The Reserve Assets may, from time to time, include receivables or other assets that depend upon the performance of a counterparty. Such assets are subject to the default, insolvency or illiquidity of the counterparty, and to possible invalidation of transactions under relevant insolvency laws. Our inability to recover funds owed by such counterparties could adversely impact the value the Reserve Assets.

3.4 We may, from time to time, engage one or more trustees, custodians or other third-party services providers to hold or manage the Reserve Assets. Those Reserve Assets may be subject to loss, theft, Government freezes or seizures or the third party’s default or insolvency. This could cause delays or other barriers to redemption of HKDAP.

3.5 HKDAP is not backed by any Government, and is not protected through any insurance provided by us, any consumer protection, insurance or compensation schemes or any other analogous or similar protections in any jurisdiction.

3.6 Customers’ right to request redemption of HKDAP is a contractual right, and it does not represent security in favour of Customers in respect of their HKDAP. Redemption requests may be rejected if they are not in the proper form from time to time prescribed by us, or if such redemption would breach applicable Laws. Our processing of redemption requests may also be delayed, postponed or suspended in certain circumstances, including without limitation illiquidity of Reserve Assets and forks in the Supported Blockchains.

4. Blockchain and technology risks

4.1 As a result of the decentralised and open-source nature of HKDAP, it is possible that one or more parties unaffiliated with us may create “copies” or “wrappers” of HKDAP. We support only HKDAP and not such copies of wrappers. Please refer to the Terms for further details.

4.2 Further, as a result of the decentralised and open-source nature of the Supported Blockchains, it is possible that the Supported Blockchains may experience upgrades, “forks” or other technical events or disruptions. These events may disrupt issuances, transfers and redemptions of HKDAP. In the event of a fork, we may assess that a particular fork contains certain attributes outside our accepted parameters, and as such we may not support such fork. We are not obliged to support any particular fork. Please refer to the Terms for further details.

4.3 Smart contracts used in the HKDAP ecosystem may contain bugs or vulnerabilities that could be exploited, resulting in cyberattacks, system compromise, data breaches or unauthorised access. HKDAP relies on third-party blockchain infrastructure providers, and failures or breaches on the part of such third parties may affect HKDAP. These events may disrupt issuances, transfers and redemptions of HKDAP. Please refer to the Terms for further details.

4.4 We do not and cannot control the Supported Blockchains and other distributed ledgers on which HKDAP are recorded and transacted. Accordingly, we are not able to prevent or protect against risks relating to the Supported Blockchains and such other distributed ledgers, which may include hacks and other coordinated attacks and decryption of the relevant encryption protocols through the application of more advanced future technologies (such as quantum computers), which could result in adverse effects for HKDAP holders (such as by reversing historical trades or by changing the protocol itself).

5. Transactions irreversible

5.1 Transactions on the Supported Blockchains in respect of HKDAP are irreversible, and, once a transaction has been completed on a Supported Blockchain, it cannot be reversed, cancelled, or modified by us. Accordingly, Losses arising out of or in connection with fraudulent or accidental transactions may not be recoverable.

5.2 When you make a transfer of HKDAP to a digital token address, you may lose any access to and any claim on the HKDAP that you had indefinitely and permanently. For example:

(A) the digital token address may have been entered incorrectly, and:

(i) the owner of that digital token address may never be discovered;
(ii) the owner of that digital token address may not return the HKDAP; or
(iii) the owner of that digital token address may return the HKDAP but first require action on your part, such as verification of your identity or paying certain fees; or

(B) you may not have (or may subsequently lose) the private key associated with the digital token address.

5.3 You bear all responsibility for any Losses arising out of or in connection with sending HKDAP to an incorrect or unintended digital token address.

6. Third party risks

6.1 HKDAP may be held, transferred or traded on third-party Markets and platforms. These Markets and platforms operate independently of us, and could be subject to operational failures, security breaches or regulatory actions.

6.2 We do not guarantee the reliability, security or compliance of any third-party Markets or platforms, and we are not responsible or liable in any way for Losses arising from their insolvency, hacking or mismanagement.

7. Legal and regulatory risks

7.1 The legal and regulatory framework governing HKDAP and stablecoins generally may be subject to further developments in Hong Kong and globally. Future legislative or regulatory changes may impose additional obligations on us or you, restrict the use or transfer of HKDAP or affect its legal status. Governments and governmental authorities may, from time to time, impose restrictions, sanctions or other enforcement actions which may impact the operation of HKDAP. We may, from time to time, be required to modify the operation of HKDAP, suspend our services or take other actions to respond to such changes.

7.2 If you are transacting HKDAP to, from or through jurisdictions outside of Hong Kong, you may be subject to the legal regimes of those jurisdictions, and we provide no assurance as to the lawfulness or legality of HKDAP in such jurisdictions.

7.3 By their nature, digital tokens including HKDAP are not physically located in any specific country, territory, geographical region or jurisdiction. Notwithstanding any provision of the Terms deeming HKDAP to be located in Hong Kong, it is possible that countries, territories or geographical regions other than Hong Kong may seek to assert jurisdiction in respect of HKDAP and apply the laws of other jurisdictions in respect of HKDAP, including where a holder of HKDAP attempts to enforce its rights under the Terms in or from a jurisdiction other than Hong Kong.

8. Blocking and Blacklisting

8.1 We reserve the right to block certain digital token addresses and, if such digital token addresses relate to your Customer account with us or your account on our Site, freeze associated HKDAP (whether temporarily or permanently) that we, in our sole and absolute discretion, determine may be associated with activity that violates applicable Laws or the Terms.

8.2 In the event that you send HKDAP to a Blocked Address, or you receive HKDAP from a Blocked Address, we may freeze such HKDAP and take steps to terminate your Customer account with us and/or your account on our Site.

8.3 In addition, in certain circumstances, we may be required to undertake further reporting to certain Governments or law enforcement agencies in relation to suspected illegal activity without notice to or informing you, and may also be required to surrender Reserve Assets associated with your HKDAP, and you may accordingly forfeit your rights associated with your HKDAP (including your ability to redeem HKDAP for HKD).

8.4 Please refer to the Terms and our Blacklisting Policy for further details.

9. Tax risks

The tax treatment of HKDAP and acquisitions, transfers and redemptions of HKDAP may vary by jurisdiction. You are responsible for determining and complying with your tax reporting, payment and other obligations. We are not responsible for determining which Tax and other Laws apply to your transactions in respect of HKDAP. Where in doubt, you should consult your own professional advisors.

10. Publicity risks

Negative publicity, whether or not accurate, relating to us, our affiliates, our service providers, or HKDAP may adversely affect public perception, user confidence and market demand in respect of HKDAP, and in turn the Market price, Market liquidity and usability of HKDAP. We do not and cannot control the contents or dissemination of such information.

11. Force Majeure

The operation of HKDAP and our provision of services in connection with HKDAP may from time to time be disrupted or suspended by Force Majeure events beyond our reasonable control. We shall not be liable for any failure, delay or non-performance by us in such circumstances. Please refer to the Terms for further details.