Risk Disclosure Statement for the Kudona solution

Investing in cryptocurrencies and using smart contracts through the Kudona application to generate returns are associated with significant risks. The risks described below can occur individually or cumulatively. For each customer, there is a risk of total loss of assets. The order in which the risks are presented does not provide any indication of the materiality of the risks, either in terms of their probability of occurrence or in terms of their impact on the investor and his claims.

1. No deposit and no deposit insurance

A customer’s deposit is not related to a regulated deposit business such as offered by regulated banks for Fiat money. Kudona exclusively acts as an intermediary and technical enabler for the customer to access the world of decentralised finance. Kudona exclusively acts upon the customer’s instruction. There is no statutory or voluntary deposit insurance for the cryptocurrencies placed in smart contracts via Kudona. In the event of a default (e.g., due to a “Black Swan” event or similar), malicious hack or failure of a smart contract or cryptocurrency, no payments will be made to the customers by third parties (e.g., a deposit protection fund). Kudona UAB ("Kudona" or "we") also does not provide compensation in the event of loss of the cryptocurrencies placed in smart contracts. 

2. Price and earnings volatility

The customer bears the risk of exchange rate volatilities regarding the cryptocurrencies acquired through Kudona. The price of cryptocurrencies on third-party trading platforms can be subject to high volatility. The customer can withdraw the number of cryptocurrencies placed by him in the smart contract plus the returns generated through the smart contract. This entails the risk that the cryptocurrencies acquired by the customer may have a lower value at the time of such withdrawal than at the time of transfer to the smart contract. The returns from the smart contract are subject to daily changes based on the current yields earned through the smart contract. Medium or long-term planning regarding the amount of income is therefore not possible. For the customer, there is the risk that the returns will decrease after the cryptocurrencies have been transferred to the smart contract. The respective daily returns are displayed to the customer within the Kudona App.

3. Smart contract risk

Smart contracts are governed by technical code which defines the rules of transactions between different parties. This technical code entails the risk that it could have malfunctions, default or be breached by external parties, which can result in a total loss of assets having been placed in such smart contracts for the customer.

4. No legal enforcement of smart contracts

The smart contracts in which the customer places the cryptocurrencies acquired through Kudona are not subject to legal supervision by any state or government authority. Smart contracts are governed by technical code which defines the rules of transactions between different parties. The technical code is not subject to governmental oversight. In case of a failure of the technical code, the customer might not have the opportunity to seek enforcement for claims that the customer might assume to exist.

5. Risk of theft

The underlying software applications and software platforms of Kudona, the cryptocurrencies and the smart contracts may be exposed to electronic or physical attacks that could result in the irreversible theft or loss of cryptocurrency or the theft or loss of private data, impacting the ability to develop, launch or use Kudona. Kudona attaches great importance to IT security and the protection of the solution provided. Nevertheless, Kudona cannot completely exclude the aforementioned risks or guarantee that they will not occur, especially with regard to third parties that Kudona has no control over whatsoever.

6. Regulatory and legal risks

Cryptocurrencies and smart contracts are new technologies. It is possible that certain jurisdictions will apply existing regulations or introduce new regulations addressing cryptocurrencies and smart contracts. This may have material effects on the current setup of Kudona, the assets and services available on Kudona, as well as the cryptocurrencies and smart contracts used by the customer through Kudona. Kudona is committed to design, modify and/or adapt our solution in such a way that it complies with all applicable laws and regulations while at the same time retaining the flexibility for customers, but cannot guarantee that certain regulatory or legal changes may not result in the limitation or termination of certain services of Kudona. Additionally, regulatory and/or legal changes might have an impact on the price of cryptocurrencies held by the customer as well as the functionality of smart contracts used by the customer.

7. Tax risks

The current tax treatment of income and earnings from cryptocurrencies and decentralised finance has not been clarified conclusively and may also depend on the individual tax treatment of the respective customer. It cannot be ruled out that the tax authorities and courts may adjust or change previous tax assessments on the treatment of income from cryptocurrencies or decentralised finance. It is also not clear whether the previously applicable principles for the tax treatment of trading in cryptocurrencies can be applied to income from the smart contracts. Kudona is not allowed to and will not advise on taxes. Please refer to your respective tax advisor and tax offices.

Note: Kudona does not provide investment advice to the client. Kudona does not verify whether the use of Kudona is a suitable investment for customers in view of their personal investment objectives and financial circumstances. Kudona also does not provide any corresponding recommendations. Kudona also does not conduct a reasonable assessment as to whether the use of Kudona is appropriate in view of the knowledge and experience of the investor.

Version 1.0, as of: 30/05/2022