Cryptocurrency Risk Disclosure
Essential information about the risks of investing in cryptoassets
Last Updated: 10 December 2024
Important Risk Warning
Cryptoassets are highly volatile and unregulated in some jurisdictions. No consumer protection. Capital at risk.
Investing in cryptoassets is high-risk. You should not invest money that you cannot afford to lose. Before making any investment, you should carefully consider your financial situation and obtain independent advice if necessary.
Capital at Risk
You may lose all of your investment
No FSCS Protection
Cryptoassets are not covered by the Financial Services Compensation Scheme
Extreme Volatility
Prices can change rapidly and unpredictably
Understanding the Risks
Before investing in cryptoassets, you should understand the following risks:
Market Risk
Cryptocurrency markets are highly volatile and can experience extreme price movements.
Price Volatility
Cryptocurrency prices can rise or fall by 10%, 20%, or even more in a single day. Historical examples include Bitcoin losing over 50% of its value in a matter of months.
Market Manipulation
Cryptocurrency markets may be subject to manipulation due to lower liquidity and less regulatory oversight compared to traditional markets.
Liquidity Risk
Some cryptocurrencies may have limited trading volume, making it difficult to buy or sell without significantly impacting the price.
No Intrinsic Value
Unlike traditional assets, most cryptocurrencies do not generate income or have underlying assets backing their value.
Regulatory Risk
The regulatory environment for cryptocurrencies is rapidly evolving and uncertain.
Changing Regulations
Governments may introduce new regulations that could restrict or prohibit certain cryptocurrency activities, potentially affecting your ability to use or trade your assets.
Tax Implications
Cryptocurrency transactions may be subject to capital gains tax. Tax rules are complex and subject to change. You should seek professional tax advice.
Cross-Border Issues
Different countries have different regulatory approaches. What is legal in one jurisdiction may not be in another.
Service Restrictions
Regulatory changes may require us to suspend or terminate services in certain jurisdictions or for certain products.
Technology Risk
Cryptocurrencies rely on complex technology that presents unique risks.
Software Vulnerabilities
Cryptocurrency protocols and smart contracts may contain bugs or security vulnerabilities that could result in loss of funds.
Network Attacks
Blockchain networks may be subject to attacks such as 51% attacks, which could compromise transaction integrity.
Hard Forks
Cryptocurrency protocols may undergo hard forks, creating new versions of the network. This can create confusion and potentially impact value.
Network Congestion
During periods of high activity, blockchain networks may become congested, leading to delays and higher transaction costs.
Security Risk
Digital assets require careful security practices to protect against theft and loss.
Hacking and Theft
Cryptocurrency exchanges and wallets may be targeted by hackers. While we implement robust security measures, no system is completely immune to attack.
Private Key Loss
If you lose access to your private keys or recovery phrases, you may permanently lose access to your cryptocurrency.
Phishing and Scams
The cryptocurrency space is targeted by sophisticated scams and phishing attempts. You should always verify communications and websites.
Transaction Errors
Cryptocurrency transactions are generally irreversible. Sending funds to the wrong address or network may result in permanent loss.
Platform & Counterparty Risk
Using any cryptocurrency platform involves risks related to the platform operator.
Exchange Failure
Cryptocurrency exchanges may fail, become insolvent, or cease operations. While Kraken is FCA regulated and maintains strong financial controls, this risk exists across the industry.
Custody Risk
When you hold cryptocurrencies on an exchange, you are trusting the exchange to safeguard your assets. This differs from holding your own private keys.
Service Interruption
Trading platforms may experience outages, technical issues, or scheduled maintenance that prevents you from accessing or trading your assets.
Counterparty Default
In peer-to-peer or lending situations, counterparties may default on their obligations.
Limited Consumer Protection
Cryptocurrency investments have significantly less consumer protection than traditional investments.
No FSCS Coverage
The Financial Services Compensation Scheme (FSCS) does not cover losses from cryptoasset investments. If Kraken or any other cryptoasset provider fails, you will not be entitled to compensation from FSCS.
Limited FOS Coverage
The Financial Ombudsman Service (FOS) may not be able to consider complaints about cryptoasset activities as they generally fall outside the ombudsman's jurisdiction.
FCA Registration
While Kraken entities are registered with the FCA, this registration is primarily for anti-money laundering purposes and does not provide the same level of consumer protection as authorization for regulated activities like banking or investment management.
Is Cryptocurrency Suitable for You?
Before investing, honestly assess your situation:
Cryptocurrency May Be Suitable If You:
- Have a high tolerance for risk and volatility
- Can afford to lose your entire investment
- Have a diversified investment portfolio
- Understand blockchain technology and cryptocurrencies
- Have conducted thorough research
- Do not need the funds for essential expenses
- Have a long-term investment horizon
- Understand and can manage the security requirements
Cryptocurrency May NOT Be Suitable If You:
- Cannot afford to lose any of your investment
- Are investing money needed for bills or essentials
- Do not understand how cryptocurrencies work
- Are risk-averse or require stable returns
- Are investing based on tips or social media advice
- Expect guaranteed returns or profits
- Are borrowing money to invest
- Are under financial pressure or in debt
Seek Independent Advice
If you are unsure whether cryptocurrency investment is suitable for you, we strongly recommend seeking advice from an independent financial advisor who is authorized by the FCA.
Key Points to Remember
Capital at Risk
You can lose some or all of your money. Never invest more than you can afford to lose.
No FSCS Protection
Your cryptocurrency investments are not protected by the Financial Services Compensation Scheme.
High Volatility
Cryptocurrency prices can change dramatically in short periods. Be prepared for significant fluctuations.
Evolving Regulation
Cryptocurrency regulations are still developing. Rules may change in ways that affect your investments.
Tax Obligations
You may be liable for capital gains tax on profits. Keep accurate records of all transactions.
Do Your Research
Always conduct thorough research before investing. Don't rely solely on others' opinions or advice.
Regulatory Information
Kraken operates in the United Kingdom through two FCA-registered entities:
Payward Limited
FCA Firm Reference Number: 928768
Registered for cryptoasset activities under the Money Laundering Regulations
Verify on FCA Register →Payward Services Limited
FCA Firm Reference Number: 1010381
Authorized as an Electronic Money Institution
Verify on FCA Register →FCA Cryptoasset Guidance
The FCA has published guidance on cryptoassets. For more information about the regulatory framework and consumer warnings, visit:
FCA Cryptoasset InformationRisk Acknowledgement
By using Kraken UK services, you acknowledge and confirm that:
- You have read and understood this Risk Disclosure Statement
- You understand that cryptoasset investments are high-risk
- You are aware that you may lose all of your invested capital
- You understand that cryptoassets are not covered by FSCS
- You are investing funds that you can afford to lose
- You have considered whether cryptocurrency is suitable for your circumstances
- You accept responsibility for your own investment decisions
Risk Disclosure Version: 2024.12.1