Updated: July 31, 2024
Before using the Yellow Card Platform (“the Platform”), you should ensure that you fully understand and can afford to undertake the risks involved in transacting in Digital Assets (terms defined in our User Agreement apply equally herein). Please note that the term Digital Assets is equivalent to “Crypto Assets” as defined by the Financial Sector Conduct Authority of South Africa in its General Notice 1350 of 2022 being::
“crypto asset”
means a digital representation of value that (a) is not issued by a central bank, but is capable of being traded, transferred or stored electronically by natural and legal persons for the purpose of payment, investment and other forms of utility; (b) applies cryptographic techniques; and (c) uses distributed ledger technology.
This Risk Disclosure outlines the most pertinent risks inherent in transacting with Digital Assets. Accordingly, the risks listed do not constitute an exhaustive list, and additional significant risks may be applicable. You should always do your own research and speak to the necessary advisors before engaging with any Digital Asset transaction.
Exchange Control Risks
The South African Reserve Bank’s (“the SARB”) position on the regulation and compliance monitoring of crypto assets are available on its website here.
Please note that the SARB cautions that “dealing in crypto assets is performed at the end-user’s sole and independent risk.” Take further note that the Exchange Control Regulations prohibit transactions where capital or the right to capital is, without permission from National Treasury, directly or indirectly exported from South Africa.
This includes transactions where an individual purchases crypto assets in South Africa and uses them to externalise 'any right to capital'. In these circumstances (and in which respect you should be guided by your tax advisor and/or legal counsel), you will be required to adhere to your annual Single Discretionary Allowance or Foreign Capital Allowance (as applicable).
In certain circumstances, we may require you to sign a declaration stating either physically or electronically, which includes the wording “I have been informed of the limit applicable to the above transaction and confirm that this limit will not be exceeded as a result of the conclusion of this transaction”. In the event that we do not request such a declaration, it shall not be construed to mean that you are relieved from compliance with the applicable Exchange Control Regulations.
It shall remain at all times your primary responsibility to ensure that your general affairs and trading activities on the Platform are in compliance with the Exchange Control Regulations in force at any given time. We shall accordingly not be liable for any sanctions, penalties, fines and/or losses you may incur as a result of non-compliance with the applicable Exchange Control Regulations.
Regulatory Status
South African resident customers of Yellow Card are onboarded and serviced by Yellow Card Financial South Africa (Pty) Limited (“Yellow Card SA”). Yellow Card SA is an incumbent Crypto Asset Service Provider (“CASP”) subject to the Financial Sector Conduct Authority’s (“FSCA”) interim exemption regime under the Financial Advisory and Intermediary Services Act (“FAIS”). The FSCA has assigned a temporary FSP number (53790) to Yellow Card SA pending the final review of its licence application. In the interim, Yellow Card SA continues to conduct its business lawfully and within the conditions set by the FSCA in respect of the exemption regime. Yellow Card SA is further a registered Accountable Institution with reporting obligations to the Financial Intelligence Centre (“FIC”) bearing registration number 50932.
Digital Asset Risks
Digital Assets are new technologies that often work differently from your prior experience with financial products. They entail various risks that you should understand and be aware of prior to using the Platform.
Before using the Platform, we encourage you to educate yourself about the risks associated with Digital Assets and not to invest money that you cannot afford to lose.
We have highlighted some of the key risks:
Digital Asset transactions are generally irreversible. This means that you may not be able to recover Digital Assets where:
- You send Digital Assets to an incorrect address;
- You send the incorrect amount of Digital Assets;
- You send Digital Assets to a fraudulent scheme; or
- Fraudulent Digital Asset transactions are made from your Account.
We will not be liable to you for any losses resulting from these kinds of accidental or fraudulent transactions.
The volatility and unpredictability of the price of Digital Assets relative to local currency may result in significant loss over a short period of time. Buying and selling Digital Assets could result in a complete loss of your funds relative to local currency.
The nature of the Digital Assets supported on our Platform are such that you may have no right of recourse against an issuing entity / protocol of the particular Supported Digital Asset. It also means that neither Yellow Card nor anyone else has an obligation to buy back your Digital Assets in the future.
Supported Digital Assets are not considered legal tender and are not backed by any government within the jurisdictions that Yellow Card is based in at this point in time. Yellow Card Accounts and value balances are not subject to any government-backed deposit insurance or any other government protections. Government regulation of Digital Assets is still unsettled and rapidly evolving.
Legislative and regulatory changes or actions at local or international level may affect the use, transfer, exchange, and value of Digital Assets. Any Digital Asset may decrease in value or lose all of its value due to legislative or regulatory activity, or other government action.
On-chain Digital Asset transactions are deemed to be made when recorded on a “blockchain” ledger, which is not necessarily the date or time that you initiate the transaction.
The value of each Digital Asset is driven by the continued willingness of market participants to exchange that Digital Asset for local currency or another Digital Asset. Should this demand disappear, it could result in permanent and total loss of the value of the Digital Asset. The volatility of the value of the Digital Asset relative to Fiat may result in significant losses.
There is no assurance that a person or business who currently accepts Digital Asset as payment will continue to do so in the future.
Buying and selling Digital Assets may result in tax liability and you are solely responsible for complying with your tax obligations.
The nature of Digital Assets means that any technological difficulties experienced by a service provider may prevent access to or use of your Digital Assets.
Stablecoins
You agree and understand that while Stablecoins are commonly purported to be a more stable form of a Digital Asset, the pegging of Stablecoins to Fiat or any other backing asset, could lead to increased risk of loss to the Account Holder in instances where the value of the relevant Fiat decreases or becomes illiquid.You acknowledge that:
- Yellow Card does not purport nor does it guarantee that any Stablecoin issued or made available on the Platform is backed by any cash reserves on the part of the issuer of the Stablecoin; and
- You assume full risk for any Stablecoins purchased and sold via the Platform.
Trading in Digital Assets together with any other digital rights or assets and use of Services provided by Yellow Card involves significant risks and potential for financial losses, including without limitation the following:
ThThe features, functions, characteristics, operation, use and other properties of any Digital Asset (“Digital Asset Properties”) and the software, networks, protocols, systems, and other technology (including, if applicable, any blockchain) (“Underlying Technology”) used to administer, create, issue, transfer, cancel, use or transact in Digital Asset may be complex, technical or difficult to understand or evaluate.
Any Digital Asset and its Underlying Technology may be vulnerable to attacks on the security, integrity or operation of the Digital Asset or its Underlying Technology (“Attacks”), including Attacks using computing power sufficient to overwhelm the normal operation of a blockchain or other Underlying Technology.
Any Digital Asset, Digital Asset Properties or Underlying Technology may change or otherwise cease to operate as expected due to a change made to the Underlying Technology, a change made using features or functions built into the Underlying Technology or a change resulting from an Attack. These changes may include, without limitation, a “fork” or “rollback” of a Digital Asset or blockchain.
Any Digital Asset may be cancelled, lost or double spent, or otherwise lose all or most of its value, due to forks, rollbacks, Attacks, changes to Digital Asset Properties or failure of the Digital Asset to operate as intended.
Digital Assets may decrease in value or lose all of its value due to various factors including discovery of wrongful conduct, market manipulation, changes to Digital Asset Properties or perceived value of Digital Asset Properties, Attacks, suspension or cessation of support for a Digital Asset by Yellow Card or other exchanges or service providers, and other factors outside the control of Yellow Card.
The risks described in this Risk Disclosure may result in loss of Digital Assets, decrease in, or loss of all value, inability to access or transfer Digital Assets, inability to trade Digital Assets, inability to receive financial benefits available to other Digital Asset holders, and other financial losses to a User.