Asset Risk Disclosure for Spain

Crypto-assets Risks Warning

High Risk Investment Product

The value of investments and the return on investments may vary significantly upwards and downwards, and the full amount of the investment may be lost.

Investments in early-stage projects involve a high level of risk, so it is necessary to have a good understanding of their business model.

Crypto-assets within the scope of this Circular are not covered by customer protection mechanisms such as the Deposit Guarantee Fund or the Investor Guarantee Fund.

The prices of crypto-assets are formed in the absence of mechanisms to ensure their proper formation, such as those present in the regulated securities markets.

Many crypto-assets may lack the liquidity necessary to be able to unwind an investment without significant losses, given that their circulation among both retail and professional investors may be very limited.

Technology-Specific Risks

Distributed registry technologies are still at an early stage of maturity, with many of these networks having been created only recently, so they may not be sufficiently tested and there may be significant flaws in their operation and security.

Transaction logging in networks based on distributed ledger technologies works through consensus protocols which may be susceptible to attacks that attempt to modify the transaction log, and if these attacks are successful, there would be no alternative log to support such transactions and, thus the balances corresponding to the public keys, and all crypto-assets could be lost.

The anonymity facilities that crypto-assets can provide make them a target for cybercriminals, since in the case of stealing credentials or private keys, they can transfer the crypto-assets to addresses that make it difficult or impossible to retrieve.

The custody of crypto assets is one of the significant factors that needs to be considered since crypto assets may be lost in their entirety in the event of theft or loss of the private keys. As explained in the section for Legal Risks below, the crypto assets are held in omnibus wallets under the name of eToro (Europe) Ltd on behalf of its clients, and clients are not provided with the private keys to those wallets, so the risk of theft or loss by the clients is minimized. eToro (Europe) Ltd is the custodian of clients’ crypto assets and performs the custody in Cyprus under the Cyprus Law.

Legal Risks

Acceptance of crypto-assets as a means of exchange is still very limited and there is no legal obligation to accept them.

Where the service provider is not located in a country of the European Union, the resolution of any dispute could be costly and fall outside the competence of the Spanish authorities.

Crypto assets acquired via the eToro platform are held by eToro (Europe) Ltd on behalf of the clients in centralised and collective omnibus wallets and clients do not have access to the private keys. Wallets used for holding clients’ crypto assets are separated and segregated from the wallets used for holding the crypto assets purchased by eToro (Europe) Ltd for its own account.

Clients have all the economic rights/benefits in relation to the ownership of the crypto assets held on their behalf under the custody of eToro (Europe) Ltd. Clients have online access to the crypto assets belonging to them through the platform, as indicated on clients statements.