with regard to the services rendered by The Rock Trading S.r.l.
1. THE ROCK TRADING - MISSIONThe Rock Trading S.r.l., with registered office in Galleria del Corso, 2, 20122, Milan, Tax Number - VAT number: IT-10120840961, registered in the Milan Companies Register no. 2507359 ("TRT") is the company owner of www.therocktrading.com ("Website").
By means of the Website, TRT mainly operates as a service provider concerning virtual currency use, by providing users, on a professional basis, with services functional to the use, exchange, maintenance of virtual currencies and its conversion from or into legal tender currencies in particular, TRT provides blockchain services to users: an internet platform enabling customers to buy and sell tokens or any other existing virtual or mathematical currency, and allowing virtual or cryptographic currencies to be converted among each other or against legal tender and vice versa.
According to Italian legal system, TRT activity falls within the definition of "Service provider related to virtual currency" (see Legislative Decree 231/2007, art. 1, paragraph 2, letter "ff"), required by art. 17-bis, c. 8-bis, Legislative Decree 141/2010, to enroll in a special section of the register managed by OAM (currently not yet established).
TRT, as service provider for virtual currency, is obliged to comply with the obligations required by the AML Law on entities, see, pursuant to Legislative Decree 231/2007.
Furthermore, the Website, TRT services and their use are neither offered to nor used by persons, natural or not, having their residence or registered office in the United States of America and in all other countries indicated by the European authorities as "blacklisted" in the relevant lists (updated on a case by case basis) accessible through the following link: https://www.ecb.europa.eu/paym/retpaym/paymint/sepa/html/index.en.html.
2. WHAT "VIRTUAL CURRENCIES" AREVirtual currencies are a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a FC, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically (For further information please refer to the EBA Opinion on Virtual Currencies of 4 July 2014, available here, also referred to in the joint communication of the Bank of Italy and the Financial Intelligence Unit dated 30 January 2015, furthermore see the definition of the Legislative Decree. 231/2007, art. 1, paragraph 2, letter "ff".).
3. VIRTUAL CURRENCY FEATURESTo identify the risks associated with virtual currencies, the main features of virtual currencies need to be understood.
Although each virtual currency has its own functioning mechanisms, most of them, as indicated by the Bank of Italy in the aforementioned communication, have the following characteristics:
- are created by a private issuer (in the case of centralized currencies), or, on a widespread basis, by users who use highly sophisticated software within open networks (in the case of decentralized currencies);
- are operated through electronic wallets [e-wallet], which can be saved on computers or smartphones, or accessed via the Internet following registration and authentication mechanisms;
- can also be purchased with legal tender currency on an exchange platform offering the service of buying, selling and converting virtual currencies with legal tender currency, or received online directly from someone who owns them, and then held on a wallet "inside" the exchange platform, or on its own wallet outside it;
- transactions through which virtual currencies are transferred have a technical irreversible character (once a transaction has been made, it is not possible to request its cancellation).
4. WHAT DIGITAL OR CRYPTOGRAPHIC TOKENS AREDigital tokens are Cryptographic Account Units issued in connection with an ICO or Initial Coin Offering process carried out specifically to collect money from the public through the sale thereof and exchange with other virtual currencies, or, in certain cases, with legal tender currencies.
In an ICO, a company, a start-up or an entity not yet organised in corporation form issues currency or cryptographic tokens and offers them for sale in exchange for legal tender, or, much more often, in exchange for virtual currencies, such as Bitcoin or Ether.
5. RISKS ASSOCIATED WITH THE USE OF VIRTUAL CURRENCIESTrading in the purchase, sale and conversion of virtual currency and digital tokens involves a number of risks. Risks include but are not limited to:
- (a) Lack of information: Failing disclosure requirements, it may be difficult to find reliable indications to understand the functioning, costs, value and risks of each type of virtual currency.
- (b) Lack of legal and contractual protection: purchase, exchange and use of virtual currencies are not supported by legal and/or contractual protection similar to that provided by legal tender transactions; virtual currency transactions are almost always technically irreversible.
- (c) Lack of regulation and supervision: Issuance and management of virtual currencies, including conversion into legal tender, are activities not subject to supervision by any other authority in Italy.
- (d) Lack of protection or guarantee of the deposits: in the case of fraudulent conduct, bankruptcy or interruption of trading platforms activity, there are no specific regulatory safeguards to cover the losses incurred. Similarly, virtual currency deposits held with third parties are not covered by traditional protection instruments such as Deposit Guarantee Schemes.
- (e) High volatility of the value and risk of loss: the value of virtual currencies is highly volatile, partly due to price formation mechanisms and the absence of a central authority to intervene to maintain their value. This may result in losses in the event of owning virtual currency.
- (f) Risk of use for criminal and illegal purposes1: virtual currency network can be used for transactions related to criminal activities, including money laundering to be avoided by adequate anti-money laundering measures;
- (g) Legal risk: Legal status of virtual currencies and specific digital tokens is uncertain. This may imply that possession or exchange in certain countries may be subject to express regulation, as well as prohibition by public authorities.
- (h) Market risk: The market for virtual currencies and cryptographic tokens is still new and uncertain. No one should invest funds in this market or speculate if not willing to make losses, or if not ready to lose the entire investment.
- (i) Counterparty risk: virtual currencies or digital tokens on deposit, including through the provision of third party services, entail custody risks. Such risks include security breaches, risk of loss, interruption of Exchanger operations (i.e. websites that allow virtual currencies to be exchanged for legal tender and vice versa or virtual currencies). End users are obliged to exercise all possible caution to avoid - or as far as possible eliminate - stocks of virtual currencies and digital tokens in the internal wallets made available by the exchange platforms.
- (j) Conversion, purchase and sale risks: in addition to liquidity risks, the values of virtual currencies and cryptographic tokens in any market are highly volatile and can change rapidly. Holders who exchange, buy or sell virtual currencies and digital tokens should pay particular attention to how the value can be affected by sudden changes or information. In addition, Holder is exposed to the risk of not being able to convert virtual currencies and digital tokens into legal tender for a long period of time.
- (k) Liquidity risk: virtual currency and digital token markets have different levels of liquidity. Some are rather liquid, while others may be less liquid. The latter may amplify price volatility.
See for further details the joint communication of the Bank of Italy and the Financial Intelligence Unit dated 30 January 2015 (click here to get access) and the warning published jointly by ESMA, EBA and EIOPA on risks related to virtual currencies (click here to get access).
6. RISKS CONNECTED WITH PARTICIPATION IN AN ICOBuying cryptographic tokens is equivalent to investing in an ICO, as defined above. As indicated by the European Securities and Markets Authority (see ESMA in its warning dated 13 November 2017, available at the link by clicking here), the main risks involved in investing in an ICO are the following:
- unregulated area, subject to potential fraud or illegal activities: Depending on how cryptographic tokens offered in an ICO are structured, they may fall outside the existing rules and may fall within an unregulated area without investor protection;
- high risk of losing invested capital: the vast majority of ICOs are launched by companies or start-ups that are at an early stage of development with a high risk of failure;
- lack of exit options and extreme price volatility: Investors may not be able to exchange digital tokens for legal tender currencies as not all cryptographic tokens are negotiable on trading platforms and their price is extremely volatile as linked to services to be developed by the issuer;
- inadequate information: Information made available to investors, e.g. white papers, is in the majority of cases uncertified, incomplete or even misleading; investors may therefore not fully understand the potential risks they take when purchasing cryptographic tokens;
- flaws in technology: The blockchain technology underlying cryptographic tokens, unlike virtual currencies, is still largely not verified and there may be software development flaws. Thus, on the one hand, investors may not be able to access or control their digital tokens, which may be stolen or removed, for example in the case of a hack, and, on the other hand, register technology may not quickly and safely operate, for example during peaks in activity.
Last Update: 26-Apr-2018 12:00am