Risk Warning

Engaging in Bitcoin transactions carries substantial risks and should only be pursued if you possess the capability to assess the inherent risks and the financial capacity to withstand a complete loss of all invested capital. You must diligently evaluate the risks outlined below, which do not constitute an exhaustive list and may not encompass all potential risks associated with Bitcoin dealings. Invest in Bitcoin only after carefully considering your financial circumstances and risk tolerance to determine its suitability.

While providing crypto-asset services is regulated under the Markets markets in crypto-assets Regulation (MiCAR) in the EU, Bitcoin investment is potentially unsuitable for retail investors, and poses a risk of total capital loss.

The Bitcoin value is exceptionally volatile. Historically, Bitcoin values have experienced significant fluctuations and extreme volatility, with the ever-present risk of complete devaluation. Unlike regulated securities markets with established value formation mechanisms, Bitcoin values are determined without such safeguards. Various factors can influence the Bitcoin market value, including: (i) its ability to trade globally; (ii) worldwide Bitcoin supply and demand, influenced by market sentiment; (iii) general economic conditions and expectations; and (iv) changes to the Bitcoin protocol itself. Such value volatility can result in substantial or total losses over a short period.

Risks associated with the Bitcoin blockchain protocol

Distributed ledger technologies remain in their early developmental stages, as many of these networks have been recently established. Consequently, these systems may not have undergone sufficient testing, and there is a potential for significant operational and security failures.

As Bitcoin is a blockchain protocol, any malfunction, breakdown, or abandonment of the underlying blockchain protocol could have a material adverse impact on it. Furthermore, advancements in cryptography or technical breakthroughs such as the development of quantum computing could pose risks to Bitcoin by rendering the cryptographic consensus mechanism that underpins the blockchain protocol ineffective. We lack control over the Bitcoin blockchain protocol, which may be updated or modified, and we cannot guarantee its functionality, security, or availability.

Risks associated with the Bitcoin Lightning Network protocol

The Bitcoin Lightning Network is a second-layer solution built on top of the Bitcoin blockchain, designed to enable faster and cheaper transactions. However, this protocol is still in its relatively early stages and carries its own set of risks. As a novel technology, the Lightning Network may contain undiscovered vulnerabilities or flaws that could be exploited, leading to potential loss of crypto-assets or network disruptions. The Lightning Network relies on payment channels with limited liquidity, which could restrict the ability to conduct larger transactions or result in higher fees during periods of high network activity. The legal and regulatory status of the Lightning Network remains unclear in many jurisdictions, leaving room for potential clampdowns or restrictive policies that could impede its adoption and growth.

Potential Bitcoin Forks

A Bitcoin fork is a technical event where the blockchain splits into two separate versions due to protocol changes in its consensus layer. The underlying Bitcoin protocol is susceptible to forks, which may alter the value or function of Bitcoin or result in multiple versions, leading to volatility as one version gains dominance over another, potentially causing the latter to lose its value. In the event of a fork, there is a risk that we may need to temporarily suspend operations related to that fork without providing advance notice to you. We will make commercially reasonable efforts to notify you of forks pertaining to Bitcoin and whether we or any (sub)custodian we may use in the future will support them by publishing such notices on our Site, and you agree to read these notices to make informed decisions regarding Bitcoin dealings.

Risks associated with forks include transaction reversals, double-spending vulnerabilities, and potential asset devaluation. The likelihood of forks varies, but they remain an ongoing risk in the Bitcoin ecosystem. There hasn't been a major fork in Bitcoin since 2017. In the event of a fork, ZEBEDEE will assess its impact and communicate any necessary actions to customers. ZEBEDEE reserves the right to support or reject forked assets based on technical and security considerations. We (and the (sub)custodians we utilize) do not accept any obligation to support any specific fork or similar distribution event, and we/the (sub)custodians shall not be liable for any determination made in this regard. You acknowledge that the fact that the (sub)custodians we employ may support a fork does not obligate us to also accept that fork or airdrop.

Risk of hacking and software and security weaknesses

The pseudonymous nature of Bitcoin can make it an attractive target for cybercriminals, as stolen credentials or private keys may enable the transfer of Bitcoin to addresses that render recovery difficult or impossible.

Hackers or other malicious groups or organizations may attempt to interfere with Bitcoin in various ways, including malware attacks, denial of service attacks, consensus-based attacks, Sybil attacks, smurfing and spoofing, as well as attacks that overpower the consensus-based mechanism upon which the Bitcoin blockchain is built, and attacks that interfere with or cause node malfunctions (nodes are computers/hardware devices that help maintain the blockchain).

There is also an inherent risk that the software and related technologies and theories we use could contain viruses. Viruses could potentially cause, among other things, complete loss of Bitcoin or negatively impact the Site or our Services.

You acknowledge the high risks associated with the use of internet-based systems, including but not limited to fraud, cyber-attacks, network and communication failures, spoofing and phishing attacks linked to Bitcoin, and that due to technological constraints, ZEBEDEE may prevent access to or use of your Bitcoin.

Smurfing

In cybersecurity the term smurfing means the practice of disguising large attacks or transactions as multiple smaller ones. In. aggregate malicious actors are aiming to move the large amount of funds or assets by performing a large number of low value transactions instead of a single large value one.

If ZEBEDEE detects (suspected) smurfing on the platform, it may result in (temporary) account restrictions or suspensions. Customers should protect themselves and their accounts by frequently reviewing their transactions history and reporting any unknown transactions and never performing transactions on behalf of someone else to ensure they do not become participants in potential smurfing activities.

ZEBEDEE has implemented robust Know Your Customer (KYC) and anti-money laundering (AML) procedures, processes and monitoring controls to prevent, identify and suspend any smurfing activities via its platform.

Spoofing

In cybersecurity, the term spoofing means impersonating legitimate entities to gain unauthorized access or information. Spoofing can result in risk of financial losses, identity theft, and compromised account security through spoofed communications or websites,

ZEBEDEE takes security of its services and customers as a core value and thus always strives to strengthen its security measures and to increase customers awareness of known fraud schemes or methods to keep their accounts and assets safe. ZEBEDEE mitigates the fraud risks from external or internal events by having robust policies and processes and amongst others has implemented the following controls:

• ZEBEDEE makes available and encourages customers to switch on Multi-Factor Authentication for transacting via ZEBEDEE applications if a higher level of security is desired;
• ZEBEDEE has a robust cybersecurity program as described above to minimize the possibility of external unauthorized access to its systems and applications;
• ZEBEDEE makes available to customers information about known fraud schemes via its FAQ and awareness pages and ensures that customers are aware that ZEBEDEE would never directly call them or request that they transfer funds or crypto-assets to other accounts;
• ZEBEDEE has a robust internal procedure to ensure that employees cannot misuse their access to make unauthorized transfers by having 4—eye principal checks, segregation of duties for employee roles, quality control checks and system level limitations to ensure employees cannot exceed their access privileges

Risks associated with regulation

While crypto-asset services are regulated under the Markets markets in crypto-assets Regulation (MiCAR) in the EU, the regulatory status of Bitcoin and distributed ledger technology may be unclear or unsettled in certain jurisdictions. The acceptance of Bitcoin as a medium of exchange remains limited, and there is no legal obligation to accept it. It is challenging to predict how regulatory agencies may apply existing regulations to Bitcoin or how legislatures or regulatory bodies may implement future changes to laws and regulations affecting Bitcoin. Regulatory actions could negatively impact Bitcoin in various ways, including, for illustration purposes, through a determination that Bitcoin is a regulated financial instrument requiring registration or licensing. We may cease providing Services related to Bitcoin if regulatory actions or changes to laws or regulations make it potentially illegal to offer such services.

You are solely responsible for thoroughly understanding and ensuring your compliance with all applicable laws, rules, and regulations in your jurisdiction, including but not limited to tax, reporting, and disclosure obligations. You acknowledge that in your jurisdiction, ZEBEDEE may not be regulated as a financial institution, and therefore, the safeguards applicable to you may vary, and the resolution of any dispute might be costly and fall outside the competence of the authorities in your country.

Bitcoin has no refund rights or similar features

Bitcoin may lack the liquidity required to exit an investment without incurring significant losses, as its circulation to both retail and professional investors may be limited.

After a Transaction is executed, you will have no right to cancel the Transaction or receive a refund, nor can you require us to exchange Bitcoin for a specific amount of fiat currency. Consequently, if there is insufficient demand or interest in Bitcoin, or if future limitations arise regarding the transferability or liquidity of Bitcoin, you may lose all or a portion of the value of your holdings.

Risks associated with safeguarding your fiat currency

We utilize our banking providers to facilitate the receipt of fiat currency from and payments to customers. Our banking providers DO NOT transfer, exchange, or provide any services in connection with Bitcoin. Your fiat currency will be held in account(s) at our banking providers under the name of Stichting Customer Assets ZEBEDEE, commingled with fiat currency deposited by or otherwise held by us on behalf of other customers of ZEBEDEE.

Risks associated with safeguarding your Bitcoin

Your Bitcoin may be pooled with Bitcoin held for other customers of ZEBEDEE, and we do not acquire any right, title, or interest in the Bitcoin of our customers. We will maintain detailed records of all Bitcoin that customers hold with us.

ZEBEDEE stores all customers Bitcoin in a wallet in the name of the Stichting Customer Assets ZEBEDEE exclusively as a bankruptcy remote legal vehicle to achieve asset segregation, separating customers' Bitcoin from ZEBEDEE ’s assets, by which the customers' Bitcoin can be safeguarded and at all times holds sufficient assets to cover the liabilities of at least 1:1. The Stichting Customer Assets ZEBEDEE is responsible for keeping and managing all Bitcoin to which the customers have a direct claim, for the purpose of safekeeping.

Investments in Bitcoin are not also covered by the investor compensation schemes under Directive 97/9/EC and the deposit guarantee schemes under Directive 2014/49/EU.

Unanticipated risks

Bitcoin is a component of and operates within a relatively new industry. In addition to the risks outlined above, there are other risks associated with your dealings in Bitcoin, including those that we cannot reasonably foresee. Additional risks may also materialize as unanticipated variations or combinations of the risks discussed in this Risk Warning.

If you have any questions or doubts regarding the merits of your potential dealings in Bitcoin, you should seek the advice of an independent financial advisor.