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Virtual Currency Trading Risk Disclosure

Moomoo Financial Inc. is providing you with the following statement to alert you of certain risk factors associated with investing in virtual currencies aka cryptocurrencies. It is essential to evaluate whether investing in cryptocurrencies aligns with your investment objectives, risk tolerance, goals and financial situation.

Cryptocurrencies have gained significant popularity as a digital and decentralized form of currency, offering potential benefits such as fast transactions, borderless transfers, and financial inclusion.

However, it is important that you fully understand the risks involved in trading in cryptocurrencies. Although not an exhaustive list, here are some significant risk factors that need to be considered when trading in cryptocurrencies:

  1. High Volatility: Cryptocurrency markets are highly volatile, with prices subject to rapid and unpredictable fluctuations. Factors such as market demand, regulatory developments, and technological advancements can significantly impact the value of cryptocurrencies. Investors should be prepared for substantial price swings that may result in significant losses.

  2. Regulatory Risks: The regulatory environment for cryptocurrencies is evolving, and changes in regulations can have a profound impact on the market. Governments and regulatory bodies worldwide may introduce new laws or policies that affect the legality, taxation, and overall use of cryptocurrencies. Investors should stay informed about regulatory developments and be aware that changes could impact the value and usability of their holdings.

  3. Security Risks: Cryptocurrency transactions are conducted on decentralized networks, making them susceptible to security breaches. Sophisticated cyber-attacks, and vulnerabilities in blockchain technology can lead to the loss of funds. Investors should take proactive measures to secure their cryptocurrency holdings, such as using reputable wallets, enabling two-factor authentication, and keeping private keys secure.

  4. Market Liquidity: Cryptocurrency markets may lack the liquidity present in traditional financial markets. Lower liquidity can result in wider bid-ask spreads and may make it challenging to execute trades at desired prices. Investors should consider the potential impact of liquidity constraints on their ability to buy or sell cryptocurrencies.

  5. Technological Risks: Blockchain technology, the foundation of cryptocurrencies, is still relatively new and may encounter technical challenges. Issues such as software bugs, network upgrades, and forks in the blockchain can impact the functionality and stability of cryptocurrencies. Investors should be aware of the technical risks associated with the underlying technology.

  6. Counterparty Risks: Engaging in cryptocurrency transactions often involves interacting with third-party exchanges, wallet providers, and other service providers. These third parties may face operational issues, financial instability, or even fraud. Investors should conduct due diligence on the reliability and security of the platforms they use and be cautious about entrusting their funds to third-party services.

  1. Market Perception and Adoption Risks: The value of cryptocurrencies is influenced by market perception and adoption. Negative public sentiment, media coverage, or a lack of mainstream acceptance can negatively impact the market value of cryptocurrencies. Investors should be mindful of external factors that may influence market sentiment.

  2. Legal and Tax Implications: The legal and tax implications of cryptocurrency transactions vary by jurisdiction. Investors should seek professional advice to understand the legal and tax obligations associated with cryptocurrency investments. Failure to comply with applicable laws and tax regulations may result in legal consequences.

Several agencies have issued consumer notices and alerts surrounding the risks of virtual currency trading. For more information see, the CFPB’s Consumer Advisory (August 2014), the CFTC’s Customer Advisory (December 2019), the SEC’s Investor Alert (May 2014), and FINRA’s Investor Alert (June 2023).