Summary

Cryptoasset Risk Disclosures

Aligned with FCA Guidance (PS23/6, COBS 4)

Important Notice: Zerion's Role as an Interface

Zerion is a non-custodial wallet provider. We provide an interface where users can see and access different swap, bridge, on-ramp, staking, and lending service providers.

Zerion does not provide these financial services directly. You are transacting directly with third-party protocols and providers.

This document provides a summary of the high-level risks associated with specific features on the Zerion platform, as well as the risks inherent to specific categories of cryptoassets.

This is not an exhaustive list. You must read the specific terms, risks, and documentation from all third-party service providers before using any service.

Part 1: Feature-Specific Risk Summaries

Due to the potential for losses, the Financial Conduct Authority ("FCA") considers cryptoassets to be high risk.

The key risks are:

You could lose all the money you invest. The value of cryptoassets can go down as well as up. Do not transact unless you are prepared to lose all the money you invest.
Prices can change rapidly. The final price you pay or receive (due to "slippage" or market volatility) may be different from the price you were quoted.
Transactions are complex and irreversible. A transaction sent to the wrong address or a faulty contract cannot be recovered.
Smart Contract Risk: The provider's protocol is built on smart contracts. An undiscovered bug or exploit could result in the total loss of your assets.
Protocol Risk: The protocol itself could fail or change its rules, leading to a loss of funds or failed rewards.
You are dealing with third parties. Your transaction is not with Zerion, but with an external provider.
You may not be protected by the Financial Services Compensation Scheme (FSCS) if something goes wrong.

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Additional Complex Yield Specific Provisions

Returns are not guaranteed. Advertised Annual Percentage Yields (APYs) are set by the third-party provider, not Zerion. These rates are variable, estimated, and not guaranteed. Past performance is not a reliable indicator of future results.
Slashing Risk for Staking. The provider's validators may act maliciously or go offline, resulting in a 'slashing' penalty where a portion of your staked assets is permanently destroyed.
Counterparty Risk for Lending. The protocol's borrowers may default, or their collateral may fall in value, leading to losses.
This is a complex investment. You should not lend your assets unless you fully understand the specific risks involved.
Legal & Beneficial Ownership. When you deposit your assets, you are transferring legal control to the third-party provider's smart contract or entity. You must read their specific terms to understand what ownership rights or claim tokens (if any) you retain. If the third-party provider or its custodians were to fail or go bankrupt, your assets would be at risk and may not be recoverable. You must check their terms to understand how you would be treated.
Yield Generation Mechanisms. The return is generated by a business model and mechanism defined by the provider. You should look for their documentation (e.g., modeling, assumptions, historical data) that supports these claims. Zerion does not calculate, verify, or guarantee these rates.

Part 2: Token-Specific Risk Disclosures

The following summaries explain the key risks for major categories of cryptoassets. It is critical to remember that not all cryptoassets are the same. You must understand the unique risks of a specific asset before investing.

Stablecoins

"Stablecoins" (e.g., USDC, USDT) are cryptoassets that aim to hold a stable value, often by claiming to be backed by reserve assets like US Dollars. The methods used to maintain this stability vary, and each method has its own set of risks.

Counterparty Risk: For asset-backed stablecoins, you are trusting a third-party (the issuer) to hold and manage the reserves. If this company fails, becomes insolvent, or mismanages its reserves, the stablecoin may lose its value.
Redemption Risk: The issuer may claim you can redeem the stablecoin for the underlying asset (like $1). There is a risk this process could fail, be suspended, or not work as expected during market stress.
Collateral Risk: The reserves backing the stablecoin could fall in value. If the reserves are other cryptoassets, they can be highly volatile, putting the stablecoin's "peg" at risk.
Foreign Exchange (FX) Risk: Most stablecoins are pegged to the US Dollar. If you are a UK investor, the value of your investment in GBP will fluctuate based on the USD:GBP exchange rate.
Algorithmic Risk: Some stablecoins are not backed by assets but use an algorithm to manage supply and maintain price. These algorithms can fail, break, or behave unexpectedly, leading to a rapid and total loss of value.

DeFi tokens

Decentralised Finance (‘DeFi’) tokens (e.g., UNI, AAVE) are used to govern or operate financial applications (protocols) built on blockchain technology.

Smart Contract Risk: DeFi protocols are run by smart contracts (code). A bug, error, or exploit in this code can be used by hackers to steal all funds from the protocol, potentially making the associated token worthless.
Regulatory Risk: The DeFi sector is new and regulations are uncertain. A government or regulator could ban, restrict, or take other action against a protocol, which would seriously harm the token's value.
"Rug Pull" / Exit Scam Risk: Projects can be launched by anonymous teams. They may "rug pull"—abandoning the project and stealing investors' money, leaving the token valueless.
Oracle (Data) Risk: Many protocols rely on external data feeds (oracles) for prices. If this data is wrong or manipulated, it can cause the protocol to fail or behave incorrectly, leading to significant losses.
Complexity Risk: DeFi protocols can be extremely complex. It can be difficult for many users to fully understand exactly how they work and what the true risks are.

Wrapped Tokens

A "wrapped" token (e.g., WBTC, cbETH) is a synthetic version of another cryptoasset. It's a token on one blockchain that represents an asset locked on another blockchain (e.g., WBTC on Ethereum represents BTC locked on the Bitcoin network).

Smart Contract Risk: The token relies on a smart contract to be created ("minted") and backed. An exploit in this contract could lead to a loss of funds.
Collateral Risk: The wrapped token's value depends on the underlying asset being securely locked. If the backing mechanism fails or is not 1:1, the wrapped token can lose its "peg."
Custodial Risk: A central third party (a custodian) often holds the underlying asset. If this custodian is hacked, fails, mismanages the assets, or becomes insolvent, the wrapped token may become worthless.
Bridging Risk: Wrapped tokens are the result of using a bridge. As noted in Part 1, bridges are extremely high-risk and are frequent targets for hacks that can result in total loss.
Price Risk: The price of the wrapped token (e.g., WBTC) may differ from the price of the underlying asset (e.g., BTC) due to low liquidity or a loss of confidence in the custodian or bridge.

Meme Coins

"Meme coins" (e.g., DOGE, SHIB) are cryptoassets whose value is primarily based on social media hype and online trends, rather than any underlying utility or business model.

Extreme Volatility: These assets are known for extreme and sudden price swings. It is common for them to lose over 90% of their value in a very short time.
No Intrinsic Value: Most meme coins have no clear purpose, utility, or business case. Their price is driven entirely by speculation and community sentiment.
Market Manipulation: These assets are highly susceptible to "pump and dump" schemes.
Lack of Transparency: Many projects are run by anonymous teams, and there is often no clear information on the project's goals, funding, or token distribution.
Speculative Risk: Investing in meme coins is a form of speculation. Their value is not based on financial fundamentals but on emotion and hype.

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