UK Investor Education

Exchange risks 

 

Kraken allows users to trade crypto assets, but is not liable for any losses nor the performance of any crypto asset on the platform. 

 

Cryptoassets on the platform are reviewed by the exchange, but are still high risk and you need to conduct your own due diligence before investing. Kraken does not guarantee an asset will deliver on any of its claims. Kraken’s marketing materials featuring a symbol or logo for a particular cryptoasset means that this cryptoasset may be available to trade on Kraken, but does not mean Kraken recommends this particular cryptoasset as a good investment. A particular crypto asset being listed on multiple exchanges means that it is available to trade on a number of platforms, but this does not mean that it is a good investment.

When investing in cryptoassets you should conduct your own research to understand the nature of any cryptoasset you wish to invest in and the risks associated with it.

 

Some users of now insolvent cryptoasset firms have suffered complete loss of all their crypto assets held on that platform. If the crypto asset platform you use becomes bankrupt or insolvent you might not receive your investment back. 

 

Handling Risks of Crypto Assets 

 

Assets held on the Kraken platform are held in custody by Kraken. Holding cryptoassets in custody is open to risks of cyber attacks and possible loss of assets. Kraken invests heavily in the security features of its platform, however, Kraken is still subject to operational, technology and cyber risks, which could lead to adverse scenarios where you may not be able to access them. For example, if there were a cyberattack on the crypto asset platform you use, you are exposed to risk and may lose some or all your assets which are likely to be permanently lost.

In addition, there are operational risks in using crypto assets. If you use Kraken to make a transfer of cryptoassets to another wallet you control, but enter the crypto wallet address incorrectly or select the wrong asset (i.e. send Bitcoin to an Ethereum wallet address), you are fully liable for the fact that these crypto assets may be lost permanently. Similarly, If you withdraw from your Kraken wallet to a wallet you self custody, then you need to keep the seed phrase or private key safe as if you lose it, your assets may never be recoverable.

The nature of cryptoassets is varying, each crypto asset may have specific risks and should be understood prior to investing. 

Cryptoasset firms in the UK are not in scope of the Financial Ombudsman Service. Fraud victims that are defrauded out of crypto assets may never receive any losses back.

 

Regulatory Risk

 

You should be fully aware of the regulatory status of the crypto asset firm that you use. Kraken is registered with the FCA as a crypto asset firm. Kraken is not authorised to, and will not, give investment advice to anyone. No protection is provided for any losses incurred while trading cryptoassets on Kraken. The assets held with Kraken are not covered by investor protection schemes and the Financial Ombudsman Service will not assist in disputes with Kraken.

If Kraken were to become bankrupt you might not receive your investment back. Cryptoassest trading is an unregulated service in the UK and your trading profits might be subject to Capital Gains Tax. You are responsible for calculating and paying any tax due from trading crypto assets. 

 

Market and Investment Risks of Crypto Assets 

 

Investing in and trading cryptoassets is a high risk investment and you must understand the risks prior to investing. 

 

You can sell your cryptoassets only when liquidity is available in the market and the market is operational. If Kraken’s platform services go down, you will only be able to buy or sell crypto assets when the platform is back up, and prices may have changed during the downtime. If there are no buyers in the market for a particular crypto asset, you will not be able to sell this asset. Similarly, if the the nearest buy or sell order is far from the current price, your trading activity may be adversely affected. 

 

If a crypto asset has risen in price dramatically in the last 24 hours the asset could fall by even more than it has risen in the next 24 hours. Previous performance is not an indicator of future performance and any asset could go up or down in the future.

Even given a long timeframe, no crypto assets are guaranteed to increase in price compared to current levels. Investing in the largest or most popular cryptoasset is still a high risk investment. You should not invest in crypto assets if you do not understand the risks associated with them. 

 

Investment Strategy Risk

When thinking of investing in cryptoassets you should only invest money you can afford to lose.  Diversifying your investment portfolio is important and means spreading your investments in different opportunities to reduce risk. The FCA has categorised cryptoassets as high risk investment, whereas stocks traded on the stock market are not classified in this way. High risk investments should only account for 10% of your net assets. There is no guaranteed level of returns and you might lose all your invested funds.

 

Asset Specific Risks

Different crypto assets carry different risks. Please see our cryptocurrency asset statements page for the risks associated with each asset.
These specific risks include but are not limited to:

 

• The risk of ‘stablecoins’ depegging from the price of the fiat currency they intend to track in price.
• The risk of ‘physically backed crypto assets’ depegging from the price of the asset they intend to track in price. 
• The risk of investing in a crypto asset linked to a company, network or protocol no longer being used and losing its value.