Registration Document for Non-Dividend Securities for Retail Investors
English version at link
Issuer-related risk factors:
- Liquidity risk: High
- Counterparty risk: High
- Forecast risk: High
- Change in the regulatory environment: Intermediate
- Interlocking personnel/conflicts of interest: Low
Capital share of DigitalAssets AG: CHF 20,000.00
The base prospectus or securities description of a Tokenized Stock
English version at link
The Issuer's securities offering is a long-term, debt-based relationship. Investment in this securities offering is not suitable for investors who have short- or medium-term liquidity needs.
In the worst case, the realization of one or more of the risks described below may result in the Issuer being unable to meet its obligations under an issue of securities or to meet them on time. Investors may therefore lose all or part of their investment in securities of the Issuer.
Risks of tokenized stocks
- Subordination risk/counterparty risk
- Investors are dependent on the solvency of the Issuer. In the event that the Issuer is unable to satisfy the claims arising from the Tokenized Stocks in whole or in part, the risk of insolvency of the Issuer exists at the expense of the investors.
- In the event of the Issuer's insolvency, third-party claims must be satisfied first and payments to investors can only be made to the extent that the issuer's funds exceed the third-party claims. Investors therefore bear the risk of partial or total loss of their purchase price.
- Risk of insufficient hedging transactions
- In the course of its normal business activities, the Issuer will, for hedging purposes, trade in the underlyings. In particular, there is a risk that the Issuer will not adequately carry out these hedging transactions, that they will fail or that they can only be carried out on unfavorable terms. These circumstances may have a material adverse effect on the Issuer's ability to redeem Tokenized Stocks. In this case, there is a risk of partial or complete loss of the capital invested.
- Default risk in hedging transactions
- The Issuer may also acquire options or futures contracts or other OTC products as part of hedging transactions. In this case, the Issuer bears the counterparty risk of its respective contractual partners. This counterparty risk consists in particular in the default of the Issuer's claim.
- No entitlement to dividend payment
- Holders of Tokenized Stocks will not receive dividend payments to the extent that the Underlying pays dividends. Even if the Issuer should collect the dividend payments, this does not mean that the dividend payments are taken into account in the price of the Tokenized Stocks or in the redemption. As a consequence, the Tokenized Stocks may actually be less valuable than the Underlying.
- Ordinary Termination Option only for Integer Tokenized Stocks
- The Tokenized Stocks to be redeemed must be integers. Investors may therefore be forced to redeem a minimum number of respective Tokenized Stocks. If they do not reach these minimum payout amounts, the Tokenized Stocks can be liquidated on their own via a possible secondary market.
- Risk arising from the character as a bearer instrument
- Payouts may only be requested from holders of the Tokenized Stocks. The Issuer may assume that the respective holder of the Tokens is also a creditor. It is therefore also released from its debt by performance to a Token holder who is not a creditor. If a Token holder is not also a creditor, there is a risk for investors that, in the event of payment to the Token holder, they will no longer be able to demand payment from the Issuer per se and may have to demand payment from the Token holder, so that they are dependent on the creditworthiness of the Token holder and may not be able to enforce any payment claims against the Token holder. This may lead to a total loss of the investment amount.
- Liquidity risk
- The Issuer is dependent on sufficient liquidity to liquidate hedging transactions in order to redeem the Tokenized Stocks. In particular, underlyings that have only a small market capitalization can be extremely illiquid due to low trading volumes. This is typically the case for commodities in particular. The liquidity risk depends in particular on the volume that the investor wishes to redeem in relation to the trading volume of the underlying. The higher the volume to be redeemed in relation to the trading volume, the greater the liquidity risk. In this case, the liquidation of the hedging transactions may fail or be significantly delayed. Insofar as this case occurs, the payout to the investor may be delayed accordingly or prove impossible.
- Foreign currency risk
- Payments are generally made in Swiss francs or in cryptocurrencies. However, the underlying assets are generally denominated in US dollars. In this respect, there is a foreign currency risk between the currency of the underlying and the payout currency. It may be that this circumstance results in the payout amount falling short of the deposit amount, even though the underlying has increased in value. This may result in a negative investment for the investor, even though the underlying asset has performed positively.
- No participation in conversion operations
- It may be that the company underlying the respective Underlying performs spin-offs, spin-offs or similar restructuring measures. To the extent that shareholders participate in these restructuring measures (for example, by automatically subscribing for shares in a spun-off company), investors have no claim to delivery of Tokenized Stocks with this underlying or to a corresponding performance in cash. The underlying value of the Tokenized Stocks is rather extended by the newly created shares, so that the value of the Tokenized Stocks results from the sum of the newly created underlying values.
- Index-specific risks
- Insofar as the Underlying is an index (i.e. a compilation of several products), the composition and the weighting of the respective Underlying may change. This may have a negative impact on the price development of the underlying and thus also on the price development of the Tokenized Stocks.
- Risks related to fees
- The performance of underlyings may possibly be influenced by fees. This applies in particular to indices or exchange traded funds (ETFs). These fees may change and have a negative impact on the performance of the respective underlying and thus also on the Tokenized Stocks. The Issuer has no influence whatsoever on these fees.
- No final maturity
- The tokenized stocks do not have a final maturity and therefore do not have to be redeemed on a specific date. The investors' right of ordinary termination is only possible with whole-number Tokenized Stocks. It may therefore be that redemption of the Tokenized Stocks with the Issuer is permanently excluded.
- Risks in connection with termination
- The Issuer is entitled to terminate the Tokenized Stocks with one month's notice in each case. It is possible that the issuer will exercise its right of termination at a time that is unfavorable from the investor's point of view, for example because the investor hopes for a further increase in value. In this case, there is a risk that the investor's profit expectation can no longer be realized and that he may be forced to redeem his tokenized stocks at a loss.
- Concentration risks due to country-or-industry-specific indices
- To the extent that the respective underlying is an index or basket of shares, it may only reflect the performance of shares or assets of certain countries or industries. Even within an index, it is possible that certain components of the basket are weighted higher than others. In this case, there is a concentration risk. It is possible that this concentration risk leads to a disproportionate negative performance of the Tokenized Stocks if the disproportionate component of the index loses value or the performance in the particular country or industry is disproportionately negative.
- Total risk of loss
- A change in the price or even the absence of a change in the price of the underlying asset on which the Tokenized Stocks are based may reduce the value of the Tokenized Stocks disproportionately to the point of worthlessness
- Price risk of the underlying asset
- The underlyings may each be traded on regulated markets or equivalent third party markets. Their prices may fluctuate extremely widely and at very short intervals. There may be a considerable difference between the price displayed in each case on the Issuer's website and the price actually realized in the course of redemption, which may be to the investor's detriment. It is therefore possible that the price that can actually be realized may fall short of the purchase price or deviate significantly negatively from it.
- Uncertain regulatory framework of tokenization
- The regulatory status of tokens, digital assets, and blockchain technology is unclear in many countries. It is difficult to predict how or whether governmental entities will regulate such technologies. It is also difficult to predict how or whether any governmental authority will make changes to existing laws, regulations or rules that affect Tokens, Digital Assets, Blockchain Technology and their applications. The Issuer could make a decision that it is necessary or in the best interests of the Issuer and its investors to cease distributing Tokenized Stocks or developing the Project entirely, or that it is necessary or in the best interests of the Issuer to cease doing business in a jurisdiction if governmental action makes it unlawful or uneconomical to continue to do so in that jurisdiction.
- Risks of Underlying Assets with Low Legal Certainty
- Tax risks
- Tax law and practice are subject to change, possibly with retroactive effect. This may have a negative impact on the value of the Tokenized Stocks and/or the investors' return. To the extent that the Issuer is obliged to pay taxes (in particular US withholding tax), this may be offset against the payout amount and reduce it accordingly.
- Software weaknesses
- The underlying software application, the underlying smart contract and the software platform for managing the investor book are constantly evolving and many aspects remain untested. Advances in cryptography or technical advances may pose risks to the Tokenized Stocks issued via digital subscription process and maintained in a digital investor book. There is no guarantee or assurance that the process for creating and issuing Tokenized Stocks will be uninterrupted or error-free, and there is an inherent risk that the software may contain weaknesses, vulnerabilities or errors that may result in, among other things, errors in the subscription, creation, delivery, recordkeeping or transferability of the Tokenized Stocks
- Risk of theft or hacking
- Incompatible wallet
- The wallet or wallet service provider used for the acquisition of Tokenized Stocks must be technically compatible with the Tokenized Stocks. Failure to ensure this may result in investors not being able to access the allocated Tokenized Stocks and may lead to a partial or total loss of the investment because technical access to the Tokens is no longer possible
- Technical risks from the use of cryptocurrencies as a means of payment
- It cannot be excluded that during the term of the Tokenized Stocks a payout in cryptocurrencies will no longer be possible for technical reasons, for example because certain cryptocurrency networks are no longer operated. There is therefore a risk that payouts by the Issuer will not be made in cryptocurrencies over the entire term of the Tokenized Stocks, as may be expected by the investor, but exclusively in Swiss francs. This risk relates to the type of payout, but not to the underlying claim of the investors, which would continue to exist in such a case and is settled in Swiss francs. In such a case, the Issuer and the investors must therefore agree on another payout currency, e.g. that the payout is to be made in another cryptocurrency. In this respect, there is a risk that such an agreement and the subsequent payout may be subject to not inconsiderable delays or additional costs, so that the investor may only receive the payout with a corresponding delay and the net amount received may be reduced.
Rights attached to the securities
- The Tokenized Stocks grant creditor rights that do not include any shareholder rights, in particular no participation, involvement or voting rights in the Issuer's shareholders' meetings or in the respective issuers of the Underlyings
- A physical delivery of the underlying is excluded. Tokenized Stocks are paid out exclusively in cash or cryptocurrencies. Tokenized Stocks do not include claims to dividend payments. To the extent that the Issuer receives dividend payments from the portfolio of financial instruments that it has acquired for the purpose of hedging and holds in its own name and for its own account, it may collect these and use them to finance its business operations.
- All amounts payable on the Tokenized Stocks shall be paid without withholding or deduction of taxes or duties of any kind, unless such withholding or deduction is required by law. The investor shall bear all personal taxes payable on the Tokenized Stocks.
- Each investor is responsible for the payment of his personal taxes. The Issuer assumes no responsibility for the payment of personal taxes or for the preparation of personal tax reports