xStocks Risk Disclosure
The below list of disclosures is not exhaustive. Potential investors should also read the risk disclosures in the following documents, which are available on backed.fi, before investing in xStocks:
xStocks are issued by Backed Assets (JE) Limited (a Jersey private limited company) (the "Issuer"), and offered to certain Kraken clients by Payward Digital Solutions Ltd. (“PDSL”), a Bermuda exempted company licensed to conduct digital asset business by the Bermuda Monetary Authority.
Holders of xStocks do not have ownership in any of the underlying stock or shares of the companies to which they are economically linked ("underlying stock"); instead, by purchasing xStocks investors can benefit from exposure to the performance of the underlying stock. Holders of xStocks have no voting rights, or distribution entitlements, or legal claims to the underlying stocks or any residual assets in the event of the underlying company’s liquidation. An investment in the xStocks does not entitle holders to receive any information from the respective issuer or sponsor of the underlying stocks or shares.
All investments in xStocks are subject to fees, as set forth in the Base Prospectus for each xStock. Consequently, the return on xStocks will not be identical to the potential return generated by directly holding the underlying stock or shares of the same companies during the same period.
Investment in xStocks involves a high degree of risk and may result in the total loss of invested capital. xStocks are a highly speculative investment and are highly reliant on technology. xStocks are complex products which are difficult to understand and may not be suitable for inexperienced investors.
BY INVESTING IN xSTOCKS, YOU CAN LOSE YOUR ENTIRE INVESTMENT. You should not invest money that you cannot afford to lose. You should seek advice from an independent and suitably licensed financial advisor and ensure that you have the risk appetite, relevant experience and knowledge before you decide to trade.
When investing in xStocks, it is your responsibility:
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To familiarize yourself with the specific features of Kraken’s xStocks product before you start trading.
- Not to invest more than you can afford to lose.
By investing in xStocks, you acknowledge that you have understood the associated risks and that you accept, in addition to all of the risks outlined in the Base Prospectus and Final Terms for the issuance linked at the top of this page, also the following:
- Investing in xStocks exposes you to market risks associated with the underlying companies (i.e., the company whose shares your xStocks represent), such as market volatility, financial performance, corporate actions, regulatory developments, and economic conditions.
- Investing in xStocks exposes you to the financial and operational risks of Kraken itself as the broker and initial custodian of your investment, which include risks related to the creditworthiness, operational and technology related risks, and solvency of Kraken, and which exist irrespective of the performance of the underlying companies.
- Investing in xStocks exposes you to liquidity risk, which is the risk that you suffer a loss because you cannot liquidate your investment in an xStock at the moment you wish to because there is insufficient purchase demand.
- Investing in xStocks exposes you to platform parameters risk, which is the risk that you suffer a loss because Kraken had to change parameters on the platform which affects xStocks.
- Investing in xStocks exposes you to operational risk, which is the risk that you suffer a loss because of a malfunction of the platform, for example resulting from scheduled or unscheduled downtimes, matching system failure, database failure, cryptocurrency transfer or storage failure, failure or malfunction of the API, hacker attacks or other failure or malfunction.
- Investing in xStocks exposes you to regulatory risk, which is the risk that you suffer a loss because Kraken has to restrict or terminate elements of our service in response to regulatory action against us or the Issuer.
- Investing in xStocks also exposes you to the financial and operational risks of Backed, as the issuer of xStocks, which include risks related to the creditworthiness, operational and technology related risks, and solvency of Backed, and which exist irrespective of the performance of the underlying companies.
- Backed is also exposed to the credit risks of the various counterparties with which it transacts and the failure of such counterparties to fulfill their respective obligations. This includes the credit risks of depositary institutions with whom Backed holds cash, crypto and securities. This credit risk includes the possibility that the depositary institution holding a financial instrument (cash, crypto or securities) will fail to fulfil an obligation or commitment to Backed. Any insolvency of such depositary institution may result in delayed or impossible access to the underlying stocks, including those serving as collateral for any xStocks. In such an event, you may face a partial or total loss of your invested capital.
xStocks FAQs
Who can invest in xStocks?
xStocks are only available to retail clients in select countries. They are not accessible in the US, Canada, UK, EU, or Australia. A list of all geos where xStocks are accessible can be found here.
What are xStocks?
xStocks are tokenized representations of real-world U.S. stocks and ETFs. Each xStock is backed 1:1 by the underlying stock. xStocks are currently on the Solana and Ink chains, and may be available on additional blockchains in the future.
Is an investment in xStocks the same as an investment in equities?
No. An investment in xStocks is not the same as a direct equity investment in any of the underlying stock or companies to which they are economically linked; instead, xStocks provide exposure to the value of those stocks and shares. Holders of xStocks have no voting rights and no legal claims to the underlying company shares or any residual assets in the event of the underlying company’s liquidation. An investment in xStocks does not entitle holders to receive any information from the respective issuer or sponsor of the underlying stocks or shares.
The respective issuer or sponsor of the underlying stocks is not involved in the offer and sale of the xStocks and is under no obligation to you. xStocks are therefore not sponsored, supported or promoted in any way by the respective issuer or sponsor of the underlying stocks, and the respective issuer or sponsor of the underlying stocks may take actions with respect to the underlying stocks without taking into account the interests of any holder of xStocks. Holders of xStocks will be unlikely to have any opportunity to influence decisions affecting the underlying stocks.
All investments in xStocks are subject to fees, as set forth in the Base Prospectus for each xStock. Consequently, the return on xStocks will not reflect the potential return of actual ownership of the underlying stock or shares of companies if held during the same period.
What stocks and ETFs are available as xStocks?
At launch, Kraken will offer around 60 assets – including stocks and ETFs – representing companies like Tesla (TSLAx), Apple (AAPLx), and GameStop (GMEx).
What’s the minimum investment for xStocks?
Clients can purchase fractional shares, with investments starting as low as $1 per xStock.
Are there any trading fees?
The purchase price for all xStocks includes a market price + 1.0% spread. Clients can use crypto, stablecoins, or fiat to purchase xStocks. For clients purchasing xStocks with all crypto or fiat other than USDG or USD, standard Instant Buy/Sell fees apply. Clients purchasing xStocks with USDG or USD will not incur any additional fees.
Can I trade xStocks 24/7?
xStocks can be traded 24/5, providing access outside of traditional market hours. Weekend trading availability is in development.
Does Kraken maintain custody of the underlying stocks?
No. The underlying stocks are maintained in depositary institutions in accordance with a custody agreement to which Kraken is not a party.
Can I withdraw xStocks to a self-hosted wallet?
Yes – self-custody is supported. You can withdraw your xStocks to a compatible on-chain wallet.
How do I fund my account to buy xStocks?
You can buy xStocks using fiat, crypto, or stablecoins.
Do I receive dividends from xStocks?
Dividend payouts will be automatically reinvested into more of the same token. Rather than receiving a cash dividend, your xStocks balance will increase to reflect the dividend.
Does Kraken provide investment advice?
No. Kraken does not provide investment advice and none of the materials on our website nor any of our correspondence with you may be interpreted as investment advice. If you are not sure if an investment in xStocks is the right investment for you, you should seek independent financial and/or tax advice.
Is Kraken obliged to accept my orders?
Kraken reserves the right to refuse an offer to trade via the platform at our sole discretion. Kraken also reserves the right to cancel a previously accepted offer at our sole discretion or to roll back trades we deem to have happened erroneously.
How much money can I lose?
By trading xStocks, you can lose your entire investment, which means the total amount you’ve invested in any particular xStock you purchase. However, you cannot lose more than that.
When can I redeem my xStocks?
Tokenholders may redeem their xStocks with Backed (for an additional fee), or sell them for USD, crypto, or stablecoins directly on the Kraken platform. Remember, all investments in xStocks are subject to fees, as set forth in the Base Prospectus for each xStock. Consequently, the value of your xStocks at redemption may be less than the potential return of actual ownership of the underlying stock or shares of companies held during the same period.
Limitations on Kraken's Liability
Kraken shall not be responsible to the extent permitted by law for any errors or omissions in the calculation of any amount or with respect to any other determination or decisions required to be made with respect to xStocks. Kraken shall not be liable for fraud, theft, cyber-attacks, drastic changes in regulation or any analogous or similar event. In no event shall Kraken have any liability for indirect, incidental, consequential or other damages (even if it was advised of the possibility of such damages) You would only be entitled to damages (if any) and are not entitled to the remedy of specific performance in respect of an xStock.