Digital Surge does not provide legal, financial, superannuation or taxation advice. Before using the Digital Surge platform you should seek independent legal, financial, taxation and other advice to check how using the services of Digital Surge relates to your circumstances. You should carefully assess the significant risks in holding, trading, investing and using Digital Assets you must be aware of before using any of the services provided Digital Surge. You are responsible for understanding these risks and for deciding whether taking these risks is appropriate for you. You should only ever use funds you can afford to lose. Please be aware that past performance of Digital Assets is no indication of future results.
Risks Specific to Digital Assets
Extreme volatility and bubble risk
Most Digital Assets are subject to extreme price volatility and have shown clear signs of a pricing bubble (being a significant, sustainable rise above the reasonable value of the Digital Asset). If you are trading, invest or otherwise using Digital Assets or products exposed to those Digital Assets, you should be aware that you could lose a large amount, or even all, of the money you have used to purchase those Digital Assets.
The Digital Asset market is changing rapidly. This market is speculative and volatile with the risk that prices of Digital Assets move quickly. The price and value of Digital Assets are constantly changing, their price is relative to other Digital Assets and their ability to be converted to Fiat Currency are important factors.
The price and value of all Digital Assets (and their volatility) are affected by unforeseeable events. The value of Digital Assets may depreciate significantly and unexpectedly.
Cyber Risk
Cyber attacks can occur, and other operational or technical failures and occurrences can result in halting transactions or temporary or permanent disruption to transactions.
DeFi and smart contracts have been known to carry exploitable bugs and mistakes. While care may be taken to make sure that contracts and their underlying code is audited, it is still possible for smart contracts to be broken, or exploited. Digital Surge does not audit any smart contracts.
Absence of protection
Despite anti-money laundering requirements being introduced globally, Digital Assets remain relatively unregulated under laws globally. This means that if you buy or hold Digital Assets, you will not benefit from the guarantees and safeguards which may apply to regulated financial services. Global financial laws generally do not offer any specific legal protection covering you from losses or guaranteeing that you will regain access to your Digital Assets holdings if for any reason an exchange or a digital wallet provider fails, goes out of business, or is subject to a cyber-attack, funds embezzlement or asset forfeiture as a result of law enforcement actions.
Lack of exit options
There is a risk of not being able to trade Digital Assets or to exchange them for traditional currencies, such as the AU or US dollar, for a long period of time. You may suffer losses in the process.
Lack of price transparency
The price formation of Digital Assets is often not transparent. There is a high risk that you will not receive a fair and accurate price when buying or selling products that invest in Digital Assets.
Misleading information
Information available to consumers wishing to buy Digital Assets is limited and may be misleading as often information published is incomplete, highly technical in nature and may be difficult to understand. It may fail to properly disclose the risks of a particular Digital Asset.
Private Key risk
Holding Digital Assets in an on-chain digital wallet under self custody comes with risk and responsibility. Private Keys required to access a Digital Asset may be lost, destroyed or stolen which can result in lost ability to liquidate the Digital Assets. There is no party who can guarantee your Private Keys can be recovered if lost, or your funds be extracted or reimbursed in the event of a loss of Private Keys.
Public Perception and Environmental Impact
The perception and use cases of Digital Assets are changing rapidly and some Digital Assets may have, or be perceived to have, an adverse impact on the environment. Negative market sentiment resulting from actual or perceived substantial environmental impact may occur and could impact the value of any associated Digital Assets.
Adoption or use cases of Digital Assets
There are comparatively limited use cases for Digital Assets in the retail and commercial marketplace compared to relatively large use by speculators, which may contribute to price volatility that could adversely affect the value of any Digital Asset you hold.
Commercial use case
Currently, there is relatively small use for Bitcoins and other Digital Assets in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect the value of any Digital Assets you hold.
Currency development risk
The core developers or other programmers of a Blockchain could propose amendments to the protocols and software associated with a particular Blockchain and Digital Asset that, if accepted and authorised by the network community, could adversely affect the value of that Digital Asset.
Blockchain forks similarly make changes to the protocols or software. Hard forks may make significant changes which can split into a new Blockchain and new Digital Asset, which can adversely contribute to price volatility.
51% attack risk
If a malicious actor or botnet obtains control of more than 51% of the processing power on a proof of work blockchain network, such actor or botnet could manipulate the transactions being recorded on the Blockchain which could adversely affect the value of a Digital Assets associated with that Blockchain.
Quantum Computing Risk
Digital Assets rely on cryptography to ensure the integrity of their accounting process. If a quantum computer is created that can decrypt the encryption used in cryptocurrency protocols, it could possibly be used to dismantle the integrity of all cryptocurrencies, rendering them useless and greatly and adversely affecting your holding, trading or otherwise using Digital Assets.
Increase in transaction fees
If fees increase for recording transactions on a Blockchain, demand for Digital Assets may reduce and prevent the expansion of the network to retail merchants and commercial businesses, resulting in a reduction in the value of Digital Assets that could adversely affect your holding, trading, investing or otherwise using an associated Digital Asset.
Fraud, theft and erroneous transactions
Digital Assets are built on immutable Blockchains and Digital Asset transactions are irrevocable. Digital Assets can be stolen or incorrectly transferred Digital Assets may be irretrievable.
Uncertainty about future use of Digital Assets
Digital Assets are a relatively new concept and asset class, so there is still some degree of uncertainty and pessimism about their use and whether their popularity will gain further traction is difficult to predict. If the popularity and use of Digital Assets diminish this could lead to their value decreasing.
If the popularity and use of Digital Assets diminish this could lead to their value decreasing.
Regulatory Risk
Regulatory Risks
Unregulated Asset Class:
- The legal status of Digital Assets is uncertain in most jurisdictions throughout the world. In Australia, Digital Assets are currently not recognised as financial products nor are Digital Assets regarded as money or currency for the purpose of the Corporations Act.
- It is impossible to predict the effect of any future regulatory change on Digital Assets as an asset class, in Australia or another jurisdiction Regulatory change may have a substantial and adverse affect on your holding, trading or otherwise using a Digital Asset
Regulation of crypto transactions:
- Regulatory changes or actions may alter the nature of how you can hold, trade or otherwise use a Digital Asset, or restrict the use of Digital Assets in a manner that could adversely affect your ability to hold, trade or otherwise use the Digital Asset.
Banning / Outlawing the ownership / use case:
- Digital Assets are legal in Australia and in many jurisdictions throughout the world, it may be illegal now, or in the future, to acquire, own, hold, sell or use Digital Assets in one or more countries.
Future Regulation for management of Digital Surge:
- Regulatory changes or interpretations could cause Digital Surge to register and comply with new regulations, resulting in potentially extraordinary, recurring or non-recurring changes to our operations which may adversely affect any holding, trading or otherwise using Digital Assets through the Digital Surge platform.
Tax Regulation
Tax regulation on Digital Assets and the treatment of digital assets as taxable assets is developing rapidly in many jurisdictions across the world. It is your responsibility to understand the tax implications of your activities when dealing with Digital Assets, and you must always comply with the specific tax rules and obligations applicable to you.
You should be aware that a foreign county’s tax position concerning a particular Digital Asset could adversely affect the value of that Digital Asset and your ability to sell that asset.
AML Exchange Risk
Digital Surge may use one or more third-party exchanges to convert the Digital Assets to fiat currencies or other Digital Assets. In Australia, an exchange is considered a “Digital Asset exchange provider” for the purposes of the AML/CTF Laws and is registered with AUSTRAC. It is possible that the AML/CTF Laws may change in the future such that they impose impediments or other barriers on Digital Surge such as (but not limited to) restricting the number of transactions that Digital Surge can make or imposing other restrictions on it.
SMSF Compliance
Digital Surge does not, and is not able, to provide you with an express or implied warranty that any SMSF services accessible through the Digital Surge platform are compliant in your jurisdiction. It is your responsibility to understand your obligations regarding compliance of your SMSF and you should speak your SMSF auditor to confirm whether any SMSF services you access through Digital Surge are compliant.
Services Risk
Counterparty Risk
Digital Surge may use one or more third-party exchanges to convert the Digital Assets to fiat currencies or other Digital Assets. Digital Surge may move your Digital Assets to third-party exchanges or other external platforms and systems to facilitate competitive pricing and the near instantaneous settlement when trading Digital Assets.
Digital Surge is not able to guarantee third parties utilized by Digital Surge to facilitate its services will not lose or fail to return assets to Digital Surge, or otherwise experience breaches resulting in your financial loss. There is a risk Digital Surge may not be able to execute or complete transactions due to the failure of operations of a third party provider.
Digital Surge relies on an Assurance Fund which holds Australian Dollars in an amount determined by Digital Surge from time to time to assist in covering any losses that may occur due to third party failure, subject to the processes set out in our terms and conditions. Be aware Digital Surge is not able to guarantee the Assurance Fund will mitigate any loss and you should carefully consider these risks and read our Terms and Conditions closely before using Digital Surge. Please note the Assurance Fund is not an insurance product.
Operational disruptions
Severe operational problems, such as trading disruptions, can occur, and you may suffer losses during these disruptions with restricted ability to buy and sell Digital Assets.
It is also possible that third party exchanges or other service providers of Digital Surge may become insolvent, or unable to provide services to Digital Surge which may reduce the resources or capacity for Digital Surge to perform its operations.
Specific Exchange risks
Security Risk:
- Digital Surge may experience security breaches and be the subject of hackers and malware. However, Digital Surge will endeavour to provide a secure environment for all data stored on our systems, and where there is an unauthorized access or breach we will take appropriate steps as set out in our Terms and Conditions.
Error Risk:
- We will endeavour to ensure all information disclosed to you through our website or app is correct, but do not warrant that such information is error free. Digital Surge’s operations and its systems are subject to human error, bugs, disruptions and other communication failures, including errors by third party exchanges or other third party service providers, which can result to unforeseeable hindrances to your use of our services.
Holding and Custodial Risk:
- Your account balances are not segregated on a per-account basis and Digital Surge does not provide custodial or fiduciary services to you, nor does Digital Surge hold your Digital Assets for you or on your behalf.
- Digital Surge provides services to you where Digital Assets are held on a 1:1 basis and also utilizes the services of third party exchanges to convert Digital Assets into fiat currency or other Digital Assets which may expose you to Counterparty Failure (see above).
Risk of Uninsured Losses:
- Digital Surge maintains the Assurance Fund which is to be used in the event of Counterparty Failure. The Assurance Fund is not an insurance product and your Digital Assets are not insured. Digital Surge does not arrange public or private insurance for you in the event of loss of your Digital Assets. You should consider specifically obtaining insurance to cover your loss of assets (if available).
Glossary
AUSTRAC means the Australian Transaction Reports and Analysis Centre;
AML/CTF Laws means the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth);
Assurance Fund means the fund described in this document intended to assist cover loss in the event of Counterparty Failure;
Blockchain means the underlying technology platform that Digital Assets use to record and validate transactions using a linked list of transaction updates on a virtual digital public ledger;
Counterparty Failure means the failure of a counterparty as set out under the section named “counterparty risk”;
DeFI means decentralised finance instruments;
Digital Asset means cryptographic coins, tokens, assets and currencies that are issued and transferred electronically through the Blockchain;
Digital Surge means Digital Surge Pty Ltd ACN 620 473 109;
Private Key means a cryptographic password which enables a holder to transact digital assets on a blockchain; and
Terms and Conditions means these terms and conditions here.