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G Risk Disclosure Statements

Key considerations: Part III of the VA Issuance Rulebook also requires all Entities in the Emirate that issue a Virtual Asset to publish a Risk Disclosure Statement (except for Exempt VAs only). Risk Disclosure Statements must comply with the Rules set out in Part III.C of the VA Issuance Rulebook.
 
The following are two examples of disclosures in a Risk Disclosure Statement which do not comply with Part III.C:
 
 “Disclosure (1): The Issuer is subject to various risks, including market, credit and operational risks, which may negatively affect the value of the Virtual Asset."
 
Key considerations: Disclosure (1) does not comply with Rule III.C.1 because the language is generic and not-specific to the material risks relating to the Virtual Asset being issued. Issuers should establish a clear link to the Issuer and/or Virtual Asset being issued and refrain from using catch-all phrases applicable to any Issuer. Issuers should provide clear and detailed explanations of such risks, considering their probability and magnitude, and also explain the consequences of such risks.
 
 “Disclosure (2): The failure of xyz protocol may result in the loss of customer assets. The Issuer does not use xyz protocol and as such there is no likelihood of any material disruption caused by a failure in xyz protocol."
 
Key considerations: Risk Disclosure Statements must disclose material risks in a concise manner. Disclosure (2) states a risk which it then explains is not applicable and/or material. If factors render a risk non-material, the Risk Disclosure Statement should not mention it at all.