Risk Statement

 

November 11, 2024

 

This Risk Statement is presented to you at the time of opening your account and is available to you on the Hibit Platform. We are required to provide you with this Risk Statement under the terms of exemptive relief granted by the Canadian Securities Administrators.  You must acknowledge having received, read and understood this Risk Statement in order to open and operate an account with Hibit Technology Ltd. (Hibit, we, us and our).  Please read this Risk Statement in its entirety.

No Canadian securities regulatory authority has assessed or endorsed the Crypto Contracts (as defined below) or any of the crypto assets made available through the Hibit Platform, including an opinion on whether any such crypto asset is a security and/or derivative.  

This Risk Statement does not disclose all of the risks or relevant considerations of entering into an agreement (such agreement, a Crypto Contract) with Hibit to buy or sell crypto assets through the Hibit Platform. In light of the risks, you should undertake such transactions only if you understand the nature of the contractual relationship with Hibit into which you are entering, and the extent of your exposure to the risks associated with trading in crypto assets. Please refer to Hibit’s Terms of Service https://support.hibit.ca/en/archives/43 and Relationship Disclosure Information found https://support.hibit.ca/en/archives/109 for details on the nature of your contractual relationship with us.

When you enter into a Crypto Contract to buy or sell crypto assets, that contract provides you with certain rights, including a contractual right to the future delivery of the crypto assets. However, these contracts or instruments do not result in an obligation to make and take immediate delivery of the crypto assets, or provide you with any rights as an owner of the crypto assets.  Because you will not take immediate delivery of the crypto assets underlying a Crypto Contract and do not have the rights of an owner of such crypto assets, this creates certain risks including the risk that we are for any reason unable to meet our contractual obligations to you.  To mitigate these risks, we hold crypto assets for the benefit of clients separate and apart from our own assets and from the assets of any custody service providers, and also use an independent third-party financial institution and custodian to hold your cash and the crypto assets underlying your Crypto Contracts. 

Approximately 80% of the total crypto assets held for the benefit of clients are held in cold storage in a custody account with Tetra Trust Company, a third party custodian appointed by us (the Custodian), and approximately 20% of the total value of crypto assets held on behalf of clients are held in an online-multi-party computation (MPC) wallet services system (i.e., hot wallets) secured by Fireblocks Inc.

Crypto assets held by the Custodian – The Custodian is a licensed Alberta trust company regulated by the Alberta Treasury Board and Finance. The Custodian has completed a System and Organization Controls (SOC) SOC 2 Type 2 examination. Additionally, the Custodian’s security technology provider has completed a SOC 3 examination. The Custodian is a “qualified custodian” for purposes of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.

The Custodian holds all crypto assets, in trust, for the benefit of clients in a segregated omnibus account in the name of Hibit. The crypto assets in this account are held in this manner to ensure that they are separate and distinct from the assets of Hibit, our affiliates and the crypto assets of any of the Custodian’s other clients.

The Custodian’s security technology provider currently maintains USD $150 million pooled customized crime insurance for digital assets, including the crypto assets owned by clients of Hibit, held in the Custodian’s cold storage system. The Custodian also directly maintains commercial property, general commercial liability, crime and cyber risk insurance in various amounts, maximum up to CAD $5 million.  The Custodian will make best efforts to distribute insurance recoveries across all clients who have suffered losses. In the event that total losses exceed insurance recoveries, this does not change the Custodian’s legal obligations to Hibit under its service agreement.

We have authority access to the crypto assets held by the Custodian for the purposes of settling transactions for our clients.  Providing Hibit access to clients’ crypto assets, exposes clients’ crypto assets to risk of loss in the case of fraud, wilful or reckless misconduct, negligence or error of Hibit or its personnel or third parties. Any withdrawal from the Custodian requires an approval from multiple representatives of Hibit and withdrawals can only be made to approved addresses. While Hibit may be required or elect to insure against the additional risk of loss which arises due to our access to clients’ crypto assets, there is no guarantee that any such insurance will be adequate to protect against any such loss. Additionally, there is a risk you will not be able to successfully obtain possession of the crypto assets, and a risk that the crypto assets in the account with the Custodian will not be sufficient to ensure that you receive the value of your interest in the crypto assets.  

Hibit has conducted due diligence on the Custodian, including, among other things, a review of the SOC 2 Type 2 examination report and the Custodian’s security technology provider’s SOC 3 examination report, and has not identified any material concerns.

Crypto assets held in hot wallets – Holding crypto assets online in hot wallets is riskier than holding assets with the Custodian as they may be susceptible to cybersecurity risks, including hacks and theft. However, holding assets in the hot wallets is necessary because crypto assets need to be online and readily tradable through the Platform. Therefore, given that Hibit holds up to 20% of the total crypto assets held for the benefit of clients in hot wallets secured by Fireblocks Inc., you may be at risk that Hibit or our personnel may lose crypto assets or have those crypto assets exposed to theft.

To mitigate the risks associated with holding crypto assets in online hot wallets, Hibit has licensed software from Digital Assets Services Limited (operatingas “Coincover”) to provide additional security for keys to crypto assets held by Hibit in hot wallets, including key pair creation, key pair storage, device access recovery and account access recovery. Backup key materialfor the hot wallets is secured by Coincover. Coincover provides a guarantee against theft or loss of the backup key material. This guarantee is backed by an insurance policy issued by a leading global insurance provider. Coincover also acts as a backup provider ensuring access to hot wallets secured by Fireblocks should access to these wallets be compromised. In addition, Hibit is required under applicable securities laws to insure against the additional risk of loss which arises due to its access to client assets.

Custody of cash – The cash received from clients when clients purchase crypto assets is held by the Custodian in a designated trust account, in the name of Hibit in trust for the benefit of its clients.. We have authority over and access to the cash held at the financial institution for the purpose of settling transactions for our clients and collecting transaction fees payable to us.

Trading in crypto assets may not be suitable for all investors. You should carefully consider whether trading is appropriate for you in light of your knowledge, experience, financial objectives, financial resources and other relevant circumstances.

Please be aware that the statutory rights of action for damages relating to misrepresentations and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Risk Statement or a Crypto Asset Statement to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.

Hibit is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Hibit Technology Ltd. dated September 14, 2023.

What are crypto assets?

Crypto assets are digital representations of value that function as a medium of exchange, a unit of account, or a store of value, but do not have legal tender status. Crypto assets are sometimes exchanged for currencies, but they are not generally backed or supported by any government or central bank. Their value is derived by market forces of supply and demand, and they are traditionally more volatile than fiat currencies. The value of crypto assets may be derived from the continued willingness of market participants to exchange fiat currency for crypto assets, which may result in the potential for permanent and total loss of value of a particular crypto asset should the market for a crypto asset disappear entirely. Federal, provincial, territorial or foreign governments may restrict the use and exchange of crypto assets, and regulation in North America and internationally is still developing. Legislative and regulatory changes or actions may adversely affect the use, transfer, exchange, and value of crypto assets.

Crypto assets differ in their functions, structures, governance and rights. Hibit permits the trading of well-established crypto assets that function as a form of payment or means of exchange on a decentralized network, such as Bitcoin and ether. These crypto assets have certain features that are analogous to existing commodities, such as currencies and precious metals, but are also different in many key respects, as described in this disclosure statement.

Stablecoins (also referred to as “value-referenced crypto assets” or “VRCAs”) are a type of crypto asset whose value is tied to an outside asset to stabilize the price.  Stablecoins are generally pegged to a fiat currency, such as the U.S. dollar, or a commodity, such as gold.  In the case of fiat-backed stablecoins, the value of the stablecoins is based on the value of the backing currency, which is held by a third-party regulated financial entity. Crypto assets backed by fiat currency are the most common and were the first type of stablecoins available on the market. The characteristics of stablecoins are as follows: (i) the value is tied to an outside asset, such as the U.S. dollar or gold; (ii) the Tether is realized off-chain, through banks or other types of financial institutions which serve as depositaries of the asset used to back the stablecoin; and (iii) the amount of asset used for backing the stablecoin must reflect the circulating supply of the stablecoin.

Hibit evaluates all crypto assets available through the Platform against Canadian securities and derivatives laws to determine whether or not the asset is classified as a security and/or derivative, and also against other applicable laws to determine whether the crypto assets would affect Hibit’s ability to meet compliance obligations. If the crypto asset is a security or a derivative under the securities or the derivatives laws of a province or territory of Canada, or it becomes characterized as such, then we are not permitted to offer that crypto asset on the Platform.  Hibit will monitor ongoing developments related to the crypto assets available through the Platform that may cause a crypto asset’s legal status, or the compliance assessment described above, to change. In connection with the evaluation of crypto assets, Hibit evaluates crypto assets based on publicly available information, including (but not limited to): (i) the creation, governance, usage and design of a crypto asset, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created the crypto asset; (ii) the supply, demand, maturity, utility and liquidity of the crypto asset; (iii) material technical risks associated with a crypto asset, including any code defects, security breaches and other threats concerning the type of blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and the legal and regulatory risks associated with a crypto asset, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of such crypto asset. In addition and if appropriate, Hibit will seek independent legal advice as to whether the crypto asset is a security and/or a derivative under Canadian securities laws.

Notwithstanding Hibit’s assessment of any crypto asset’s legal status, Hibit understands that any regulators or securities regulatory authorities of any province or territory of Canada may make a determination that a crypto asset is a security and/or derivative, and may be required to halt or withdraw such crypto asset from trading on Platform and clients holding such crypto asset may be required to liquidate their positions, potentially at a significant loss. In the event that Hibit halts or withdraws a crypto asset from trading on Platform, affected clients will be notified via the Platform or other electronic means and advised of the options available to them in relation to such crypto asset and any applicable periods to sell or withdraw their positions in such crypto asset.

Canadian securities regulators have expressed an opinion about VRCAs, and other stablecoin arrangements, including that VRCAs may constitute securities and/or derivatives. Accordingly, in accordance with the terms of the exemptive relief granted by Canadian securities regulators, Hibit will not permit clients to buy or deposit a VRCA or trade a Crypto Contract based on a VRCA without the prior written consent of Hibit’s principal securities regulator and the regulator or securities regulatory authority of the other Jurisdiction(s) and subject to such terms and conditions as may be imposed on Hibit and the issuer of the VRCAs by the regulator or securities regulatory authority.

For more information about and a plain language description of each crypto asset available through the Platform, including the due diligence performed by Hibit before making each crypto asset available through the Platform and any risks specific to each crypto asset, please refer to the Crypto Asset Statement for each crypto asset found here {here} https://support.hibit.ca/en/archives/135.

Risks in trading crypto assets and Crypto Contracts

Trading in crypto assets through the purchase and sale of Crypto Contracts comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, crypto asset markets and exchanges are not regulated with the same controls or client protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a crypto asset as payment today will continue to do so in the future. Investors should conduct extensive research into the legitimacy of each individual crypto asset, including its platform, before investing. The features, functions, characteristics, operation, use and other properties of the specific crypto asset may be complex, technical, or difficult to understand or evaluate. The crypto asset may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the crypto asset’s blockchain or other underlying technology. Some crypto asset transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.

Crypto asset trading requires knowledge of crypto asset markets. You should have appropriate knowledge and experience before engaging in substantial crypto asset trading. Any individual crypto asset may change or otherwise cease to operate as expected due to changes made to its underlying technology, changes made using its underlying technology, or changes resulting from an attack. These changes may include, without limitation, a “fork”, a “rollback”, an “airdrop”, or a “bootstrap”. Such changes may dilute the value of an existing crypto asset position and/or distribute the value of an existing crypto asset position to another crypto asset. Any crypto asset may be cancelled, lost or double spent, or otherwise lose all or most of their value, due to forks, rollbacks, attacks, or failures to operate as intended.

In addition, any insurance or surety bonds maintained by Hibit for the benefit of its clients may not be sufficient to cover any losses by clients as a result of theft of such clients’ crypto assets.

Crypto assets trading can be extremely risky. Crypto assets trading may not generally be appropriate, particularly with funds drawn from retirement savings, student loans, mortgages, emergency funds, or funds set aside for other purposes. Crypto assets trading can lead to large and immediate financial losses. The volatility and unpredictability of the price of crypto asset relative to fiat currency may result in significant loss over a short period of time. Transactions in crypto assets may be irreversible, and, accordingly, losses due to fraudulent or accidental transactions may not be recoverable. The nature of crypto assets may lead to an increased risk of fraud or cyber-attack.

Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if a crypto asset is halted or withdrawn from trading on the Platform due to recent news events, unusual trading activity, changes in the underlying crypto asset system, or changes in the regulation of such crypto asset.

The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures software failures, network connectivity disruptions, and data corruption.

Hibit believes that its clients should be aware of the risks involved in trading in crypto assets through the purchase and sale of Crypto Contracts. Crypto asset trading through the purchase and sale of Crypto Contracts may not be appropriate for you, particularly if you use funds drawn from retirement savings, student loans, mortgages, emergency funds, or funds set aside for other purposes. The volatility and unpredictability of the price of crypto assets relative to fiat currency may result in significant loss over a short period of time. 

The following is a brief non-exhaustive summary of certain more significant factors and special risks you should take into account when deciding whether to trade crypto assets.

1. Short history risk

As a relatively new open source technology, it is expected that there will continue to be technical developments in blockchain technology, which could impact the value of a crypto asset. Due to this short history, it is not certain whether the economic value, governance or functional elements of crypto assets will persist over time. The crypto asset community has successfully navigated a considerable number of technical and political challenges since the genesis of the Bitcoin blockchain, which Hibit believes is a strong indicator that it will continue to engineer its way around future challenges. That said, the continuation of a vibrant crypto asset community is not guaranteed, and insufficient software development, contribution rates, community disputes regarding the development of the network and scaling options, or any other unforeseen challenges that the community is not able to navigate could have an adverse impact on the price of a crypto asset.

Open source developers of blockchain technology have signaled that they will continue to make efforts to improve the scaleability and security of public blockchains like Bitcoin and Ethereum. For example, in respect of the Ethereum blockchain, developers are planning to replace the current hash-based mining consensus mechanism of proof-of-work with a proof-of-stake mechanism. Changes may also occur to the Bitcoin blockchain, for example with the continued development of scaleability protocols like the Lightning Network, which operate on top of the Bitcoin blockchain. The expected timing and impacts of this change are uncertain.

• Volatility in the price of crypto asset and loss of liquidity

The crypto asset markets are sensitive to new developments, and since volumes are still maturing, any significant changes in market sentiment (by way of sensationalism in the media or otherwise) can induce large swings in volume and subsequent price changes. Crypto asset prices on trading platforms have been volatile and subject to influence by many factors, including the levels of liquidity, public speculation on future appreciation in value, swings in investor confidence and the future growth of alternative crypto assets that may gain market share. In certain circumstances, it may become difficult or impossible to assess the value of your crypto assets.

The trading of crypto assets on public trading platforms has a limited history. The prices available on those platforms have, in some cases, been more volatile and subject to influence by additional factors not specific to the value of crypto assets, including liquidity levels and operational interruptions. Operational interruptions can limit the liquidity of crypto assets on the trading platform, which could result in volatile prices and reduced confidence in the crypto assets traded on those platforms.

Hibit uses multiple brokers, which we refer to as liquidity providers, to buy and sell the crypto assets that we trade for you. These liquidity providers connect to multiple trading platforms in order to ensure ongoing liquidity of crypto assets. Use of multiple liquidity providers and multiple trading platforms is designed to reduce the liquidity risk and operational risk associated with any one trading platform. Additionally, the liquidity providers facilitate all settlement post-trade thereby eliminating counterparty risk. However, there is a risk that the liquidity sources accessed directly and indirectly by Hibit are unable to provide a fair price. This risk may be greater during periods of high market volatility or operational outages at a major trading platform. To mitigate this risk, Hibit will always execute a purchase or sale at the best price available at the time among its liquidity providers.

• Potential decrease in global demand for crypto assets

Crypto assets represent a new form of digital value that is still being digested by society. Their underlying value is driven by their utility as a store of value, means of exchange, or unit of account. Just as oil is priced by the supply and demand of global markets, as a function of its utility to, for instance, power machines and create plastics, so too is a crypto asset priced by the supply and demand of global markets for its own utility within remittances, B2B payments, timestamping, etc. Speculators and investors using crypto asset as a store of value then layer on top of means of exchange users, creating further demand. If consumers stop using crypto assets as a means of exchange, or their adoption slows, then the price may suffer. Investors should be aware that there is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future or that the acceptance of crypto assets for payments by mainstream retail merchants and commercial businesses will continue to grow.

While the value of Bitcoin may be derived primarily from its capitalization and position as first mover, the value of ether relies far more on its underlying blockchain technology. The Ethereum blockchain is intended to allow people to operate decentralized applications using blockchain technology that do not rely on the actions of a centralized intermediary. Ether, which is the primary currency of the Ethereum blockchain, can then be used to compensate for the effort of others to power these decentralized applications and ensure that any transactions that occur on these applications are recorded in the blockchain. Accordingly, the long term value of ether may be tied to the success or failure of the blockchain technology and the decentralized applications built upon the Ethereum blockchain.

• The blockchains on which crypto assets operate may temporarily or permanently fork

Both the Bitcoin and Ethereum blockchain networks are powered by open source software. When a modification to that software is released by developers, and a substantial majority of miners consent to the modification, a change is implemented and the blockchain network continues uninterrupted. However, if a change were to be introduced with less than a substantial majority consenting to the proposed modification, and the modification is not compatible with the software in operation prior to its modification, the consequence would be what is known as a “fork” (i.e. a split) of the blockchain. One blockchain would be maintained by the pre-modification software and the other by the post-modification software. The effect is that both blockchains would operate in parallel, but independently. There are examples of such forks occurring in the past on both the Bitcoin and Ethereum blockchain networks. In the future, such a fork could occur again, and affect the viability or value of a crypto asset. Hibit may choose not to support any future fork of the underlying blockchain of the crypto assets available on our platform, in which case you may not have any rights to the new crypto assets that may be created as a result of that fork.

• Issues with the cryptography underlying the crypto-networks

In the past, flaws in the source code for digital assets have been exposed and exploited, including flaws that disabled some functionality for users, exposed users’ personal information and/or resulted in the theft of users’ digital assets. Although the Bitcoin and Ethereum blockchains have demonstrated resiliency and integrity over time, the cryptography underlying either one could, in the future, prove to be flawed or ineffective. For example, developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in the cryptography of the blockchain network being vulnerable to attack. This could negatively affect the value of crypto assets including those underlying the Crypto Contracts purchased and sold through Hibit.

• Uncertainty in regulation and future financial institution support

The regulation of crypto assets continues to evolve in Canada and in foreign jurisdictions, which may restrict the use of crypto assets or otherwise impact the demand for crypto assets. There may be limitations on the ability of a securities regulator in Canada to enforce Canadian laws on foreign entities, and foreign rules that apply to crypto asset activities which occur in other jurisdictions may not necessarily be enforced in that jurisdiction. Furthermore, banks and other financial institutions may refuse to process funds for crypto asset transactions, process wire transfers to or from crypto asset trading platforms, crypto asset-related companies or service providers, or maintain accounts for persons or entities transacting in crypto assets.

• Concentration risks

Certain addresses on the Bitcoin and Ethereum blockchain networks hold a significant amount of the currently outstanding Bitcoin and Ether, respectively. If one of these addresses were to exit their Bitcoin or ether positions, it could cause volatility that may adversely affect the price.

Further, if anyone gains control over 51% of the computing power (hash rate) used by the blockchain network, they could use their majority share to double spend their crypto assets. If such a “51% attack” were to be successful, this would significantly erode trust in public blockchain networks like Bitcoin and Ether to store value and serve as a means of exchange, which may significantly decrease the value of crypto assets.

• Electronic trading and dependence on the internet

There are risks associated with using an internet-based trade execution software application including, but not limited to, the failure of hardware and software. Hibit maintains an independent and secure ledger of all transactions to minimize loss, and maintains contingency plans to minimize the possibility of system failure. However, Hibit does not control signal power, reception, routing via the internet, configuration of your equipment or the reliability of your connection to the internet. The result of any failure of the foregoing may be that you are unable to place an order, your order is not executed according to your instructions, or your order is not executed at all. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price. This can occur, for example, when the market for a particular crypto asset suddenly drops, or if trading is halted due to recent news events, unusual trading activity, or changes in the underlying crypto asset system. The greater the volatility of a particular crypto asset, the greater the likelihood that problems may be encountered in executing a transaction. In addition to normal market risks, you may experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.

• Cyber security risk

The nature of crypto assets may lead to an increased risk of fraud or cyber attack. A breach in cyber security refers to both intentional and unintentional events that may cause Hibit to lose proprietary information or other information subject to privacy laws, suffer data corruption, or lose operational capacity. This in turn could cause Hibit to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to Hibit’s digital information systems (e.g. through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e. efforts to make network services unavailable to intended users). In addition, cyber security breaches of Hibit’s third-party service providers (e.g. the liquidity providers and custodian) can also give rise to many of the same risks associated with direct cyber security breaches. As with operational risk in general, Hibit has established risk management systems designed to reduce the risks associated with cyber security.

1. Open loop system

The Hibit Platform operates on an “open loop” system – meaning that clients are permitted to transfer into their account, crypto assets purchased outside the Platform and obtain delivery from Hibit any crypto assets to which they have an interest in pursuant to their Crypto Contracts with Hibit. While an open loop system provides certain advantages such as flexibility on the transfer of your crypto assets, you may also be exposed to certain other risks, including receiving crypto assets that may have been stolen or otherwise have been tainted and could subject you to a third party claim in relation to those crypto assets.

1. Custody of crypto assets

As noted above, approximately 80% of the total crypto assets are held in cold storage in a custody account with the Custodian, and approximately 20% of the total crypto assets held for the benefit of clients are held online in hot wallets secured by Fireblocks Inc.

While Hibit believes that these arrangements adequately protect our clients, these arrangements do expose clients to certain risks, including, but not limited to: (i) risks relating to crypto assets being held in hot wallets and not being able to obtain possession of their crypto assets, including as a result of loss or theft of the crypto assets in the case of fraud, wilful or reckless misconduct, negligence or error of Hibit or its personnel or third parties or in the case that Hibit fails to maintain adequate security and control of any and all keys, IDs, passwords, hints, personal identification numbers, API keys, 2-factor authentication devices or backups, or any other codes that Hibit uses to access the accounts held by the Custodian or by Hibit; and (ii) any potential deficiencies in the Custodian’s insurance or risk management, or in Hibit’s insurance or surety bonds maintained by Hibit, which may not be adequate to protect against loss or theft of the crypto assets.

1. Custody of client cash

As noted above, all cash received by Hibit from clients is held by the Custodian in Hibit’s name in a designated segregated trust account for our clients.  While Hibit believes that these arrangements adequately protect our clients, these arrangements do expose clients to risk of loss in the case of wilful or reckless misconduct, gross negligence or error of Hibit or its personnel. In addition to any insurance obtained by Hibit to protect against such losses, Hibit mitigates against this risk by implementing controls including, but not limited to: (i) ensuring that clients cash is held separately from Hibit’ own cash, including the fees earned from transactions; (ii) ensuring that all cash holdings are reconciled on a daily basis to identify discrepancy and potential risk; (iii) ensuring that any cash transfer request from a client has to be approved by a designated officer and the original request from client has to be supplied for approval; (iv) limit the dollar amount of cash transfers within a 24 hour time period; and (v) notify clients via the Platform or other electronic means to confirm each cash deposit or withdraw against the client’s account.

1. Lack of investor protection insurance

Crypto Contracts and crypto assets purchased and held in an account with Hibit are not protected by the Canadian Investor Protection Fund, the Canadian Deposit Insurance Corporation or any other investor protection insurance scheme.

1. Commission and other charges

Although Hibit does not charge a commission fee, there are certain costs built into the spread offered on your purchase and sale of crypto assets, including transaction fees, as disclosed to you within the Hibit Platform. Fees are based in part on the fee charged to us by our third-party liquidity providers and custodian, which are subject to change.

1. Leverage risk disclosure

Using borrowed money to finance the purchase of crypto assets involves greater risk than using cash resources only. If you borrow money to purchase crypto assets, your responsibility to repay the loan and pay interest as required by its terms remains the same even if the value of the crypto assets purchased declines.

This Risk Statement was last updated on November 11, 2024