Wealthsimple Crypto Product Risk Disclosure
Wealthsimple operates a platform that permits clients resident in Canada to open a Crypto account to buy, hold, stake, sell, deposit and withdraw crypto assets. Wealthsimple believes that its customers should be aware of the risks involved in these activities.
This risk statement (the Statement) is presented to you at the time of opening your Crypto account and is available to you within your documents in the Wealthsimple web site and mobile application. You must acknowledge having received, read and understood this Statement in order to open and operate a Crypto account with Wealthsimple. Please read this Statement in its entirety.
Buying, selling, owning, staking or otherwise using crypto assets may not be appropriate for you, particularly if you use funds drawn from retirement savings, student loans, mortgages, other loans, emergency funds, or funds set aside for other purposes. You should carefully consider whether trading, staking or otherwise using crypto assets is appropriate for you in light of your knowledge, experience, risk tolerance, financial objectives, financial resources and other relevant circumstances. Similar to trading stocks on traditional exchanges, you should always research individual crypto assets prior to making a purchase or investment so that you can appropriately gauge the risks against your personal circumstances.
This statement does not disclose all of the relevant factors, risks or other considerations of buying, selling, transferring, staking, and holding crypto assets. In light of these risks and other considerations, you should perform your own assessment to determine the appropriate level of risk for your personal circumstances, and you should only buy, sell, transfer, stake, hold or otherwise use crypto assets if you understand and accept the nature of your contractual relationship with Wealthsimple and the extent of your exposure to the risks associated with trading, staking or transferring crypto assets.
In the course of preparing this Statement, Wealthsimple has incorporated publicly available information. Although Wealthsimple has taken steps to obtain information from apparently reliable sources, information contained in this disclosure may be inaccurate, incomplete or out-of-date.
Wealthsimple’s crypto trading platform is provided by Wealthsimple Investments Inc. (WSII). WSII is a corporation governed by the federal laws of Canada with its principal office in Toronto, Ontario. WSII is the successor by amalgamation to Wealthsimple Digital Assets Inc., which operated the crypto trading platform prior to January 1, 2024. WSII is registered under Canadian securities laws in the categories of investment dealer and investment fund manager in all provinces and territories and is a member of the Canadian Investment Regulatory Organization. WSII is also registered as a money services business under regulations made under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada).
For more information about Wealthsimple and its relationship with you, please refer to Wealthsimple’s Client Relationship Disclosure.
Wealthsimple may have potential or existing material conflicts of interest with your interests. Please refer to Wealthsimple’s Conflicts of Interest Disclosure for further information.
Crypto assets are a form of digital asset where ownership or control is recorded on a public, decentralized ledger and transfers of ownership or control are secured and verified using cryptography.
There are various types of crypto assets. Among other uses, crypto assets may:
act as a medium of exchange or payment;
provide a store of value;
confer the ability to vote or otherwise participate in the governance of crypto asset protocols or other organizations;
provide access to decentralized protocols or computer systems;
be redeemable or exchangeable for money or other property; or
represent ownership rights to physical commodities or other assets.
Crypto assets are not generally backed or supported by any government, central bank or other central authority.
The Canadian Securities Administrators have published regulatory guidance that states that Canadian securities legislation applies to crypto asset trading platforms that facilitate the trading of instruments or contracts involving crypto assets because the user’s contractual right to the crypto asset may itself constitute a security and/or a derivative (a Crypto Contract).
Wealthsimple’s platform permits you to enter into Crypto Contracts to buy, hold, stake, sell, deposit or withdraw crypto assets. These activities constitute the trading of securities and/or derivatives.
Wealthsimple offers Crypto Contracts and operates the platform in reliance on exemptions from Canadian securities laws set out in the exemptive relief decision In the Matter of Wealthsimple Investments Inc. dated December 18, 2023.
Statutory rights in section 130.1 of the Securities Act (Ontario) and similar statutory rights under securities legislation of other Canadian jurisdictions do not apply in respect of this Risk Disclosure or any Crypto Asset Statement (as defined below) to the extent that a Crypto Contract is distributed under the prospectus relief set out in the decision above.
No securities regulatory authority or regulator in Canada has assessed or endorsed the Crypto Contracts or the crypto assets made available through Wealthsimple’s platform.
Your Crypto Account
Your Crypto account and use of Wealthsimple’s platform is governed by the Crypto Client Agreement. This Statement is not intended to amend or modify the Crypto Client Agreement between you and Wealthsimple.
When using your Crypto account, you should be aware that:
Wealthsimple may monitor trading and other activity in your Crypto account;
There may be limits on the amount of crypto assets that you may purchase;
Wealthsimple may restrict your ability to buy, sell, deposit, withdraw or stake crypto assets;
Wealthsimple may request additional information about you, your trading activity or other transactions in your Crypto account; and
Wealthsimple may suspend or close your Crypto account.
You are responsible for using the platform in accordance with the Crypto Client Agreement and applicable law. Your responsibilities include but are not limited to:
ensuring information provided by you to Wealthsimple is current, accurate and complete;
ensuring your login credentials are confidential and secure;
not allowing third parties to access your Crypto account;
ensuring that you have sufficient funds in your account to settle transactions made using the platform; and
only using the platform for your personal purposes and not for business or commercial purposes.
Trading of Crypto Assets
Listing of Crypto Assets
Wealthsimple reviews crypto assets to determine whether to allow clients to enter into Crypto Contracts to buy, sell, stake or hold the crypto assets on the platform.
This review includes, but is not limited to, publicly available information concerning:
the creation, governance, usage and design of the crypto asset, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that created the crypto asset;
the supply, demand, maturity, utility and liquidity of the crypto asset;
material technical risks associated with the crypto asset, including any code defects, security breaches and other threats concerning the crypto asset and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
legal and regulatory risks associated with the crypto asset, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of the crypto asset.
Wealthsimple’s assessment includes an assessment of whether a crypto asset is a security and/or derivative and is being offered in compliance with securities and derivatives laws under Canadian securities laws and the securities and derivatives legislation of the foreign jurisdiction with which the crypto asset has the most significant connection. This assessment includes:
consideration of statements made by Canadian regulators or securities regulatory authorities;
consideration of statements other regulators, including regulators in jurisdictions that are members of the International Organization of Securities Commissions;
consideration of decisions of courts or tribunals in Canada and foreign jurisdictions; and
consideration of legal advice, as required.
There may be risks to you in the event that Wealthsimple incorrectly determines that a crypto asset is not a security and/or derivative. These risks are described in the “Summary of Risks” section below.
Crypto Asset Statements
Wealthsimple has prepared a plain language description (a Crypto Asset Statement) of each crypto asset made available through the platform and the risks of these crypto assets. All Crypto Asset Statements can be found on Wealthsimple’s web site.
Wealthsimple prepares the Crypto Asset Statements based on publicly available information provided by third parties. Although Wealthsimple has taken steps to obtain information from apparently reliable sources, this information may be inaccurate, incomplete or out-of-date. Crypto Asset Statements are not exhaustive of all risks associated with a crypto asset. You should perform your own assessment to determine the appropriate level of risk for your personal circumstances.
Monitoring of Listed Crypto Assets
Wealthsimple monitors developments related to the crypto assets available on its platform, including developments that require material changes to this Statement or the Crypto Asset Statements or that result in material risks with respect to crypto assets generally or specific crypto assets.
In the event of material changes to previous Crypto Asset Statements or new material risks relating to a crypto asset, Wealthsimple will update the Crypto Asset Statement and notify you of the change.
In some circumstances, Wealthsimple may determine that, due to material changes or new material risks, Wealthsimple will no longer support a crypto asset on its platform. Refer to the section entitled “Delisting Crypto Assets” for further information on Wealthsimple’s delisting process.
Hard Forks and Airdrops
In the event that a change is activated in crypto asset network software and the community of miners or validators is split in their acceptance of such change, this could result in what is known as a “hard fork”. One blockchain would be maintained by nodes using one version of the software and the other by another, incompatible version of the software, each running parallel to one another and building independent blockchains with independent native assets.
In addition, in some circumstances, persons unrelated to Wealthsimple may transfer, or attempt to transfer, new crypto assets to existing holders of a crypto asset supported by Wealthsimple. This is commonly referred to as an “airdrop”.
Both hard forks and airdrops may result in the creation of new crypto assets that can be controlled by existing holders of other crypto assets. Due to technical limitations, Wealthsimple, its custodians and other service providers may be unable to access or otherwise support forked or airdropped crypto assets. Further, new crypto assets resulting from hard forks or airdrops may not satisfy the criteria for support on Wealthsimple’s platform.
Wealthsimple reserves the right to determine, in its discretion, whether to support forked or airdropped assets. In the event that Wealthsimple elects to support forked or airdropped assets, Wealthsimple may withhold, retain or sell a portion of the forked or airdropped assets to compensate Wealthsimple for the reasonable costs and efforts of doing so.
Third Party Data and Other Information
When using the platform you may have access to crypto asset market data, including historical prices, trading volumes, staking reward rates, performance graphs and other information relating to crypto assets available on the platform. This information may be, or may be based on, data or information supplied by third parties. Wealthsimple makes efforts to ensure this information is accurate but does not guarantee its accuracy, currency and completeness.
Certain price data available on the platform is based on crypto asset trading on other market venues and may not reflect the price at which trades can be executed on the platform.
Any up-to-date market information, including quotes or charts that we provide you is provided ‘as is’ and ‘where is’ without representations or warranties of any kind, and may contain typographical errors, be incomplete, or inaccurate. While we may correct any such errors, missing information, or inaccuracies, we are under no obligation to do so.
When using the platform, you may have access to news content obtained from third parties. Please refer to Wealthsimple’s In-App News Disclosure.
Wealthsimple relies upon multiple crypto asset trading firms, which it calls liquidity providers, to act as sellers of crypto assets that may be purchased by you. Liquidity providers also buy any crypto assets that you wish to sell. After an order has been placed by you, Wealthsimple obtains prices from liquidity providers and endeavours to provide best execution of your orders. For further information, refer to Wealthsimple’s Best Execution and Order Handling Disclosure - Crypto.
When placing orders to buy or sell crypto assets, Wealthsimple will show you the estimated price and fees. All confirmed orders are final and non-reversible.
For certain types of orders, such as scheduled or recurring orders, when you first place the order, Wealthsimple will provide you with a reasonable estimate of fees that will apply to your order once executed.
The amount of crypto assets or funds you receive after execution of your order may differ
from the estimates provided to you, especially during periods of high volume, illiquidity, fast movement, or volatility in crypto asset markets.
No Margin or Leverage
Wealthsimple does not allow you to trade on margin or otherwise use any form of leverage.
You may not place an order to purchase crypto unless you have sufficient funds or other crypto available in your account to satisfy your order. You may not place an order to sell crypto assets unless you have sufficient crypto available in your account.
Wealthsimple evaluates the prices obtained from its liquidity providers on an ongoing
basis against global benchmarks to provide fair and reasonable pricing to its clients. Wealthsimple endeavours to execute trades with the liquidity provider offering the best available pricing at the time of the trade. For further information, refer to Wealthsimple’s Best Execution and Order Handling Disclosure - Crypto.
Trade Errors, Corrections and Cancellations
Wealthsimple cannot correct executed orders that were mistyped or otherwise wrongly placed by you.
In the event that Wealthsimple or a liquidity provider determines that as a result of a technical issue affecting Wealthsimple or a liquidity provider, an executed order did not reflect the fair market value for the crypto asset, the order may be corrected or cancelled.
In certain circumstances, Wealthsimple and/or the liquidity providers may refuse or cancel any order or part of an order. Wealthsimple is not responsible for any losses incurred as a result of our or a liquidity provider’s decision to cancel an order or any part of an order or refuse to execute an order placed by you.
Wealthsimple settles transactions with the liquidity providers on your behalf on a net basis within two business days.
On each order, Wealthsimple adds all applicable fees charged for the transaction, less any discounts or other fee reductions that may apply, to the price provided by a liquidity provider. See the Wealthsimple Crypto Fee Schedule for more information.
Most crypto assets are priced in US dollars (USD) and your Crypto account is a Canadian-dollar (or CAD) account. As a result, Wealthsimple converts any USD prices from liquidity providers into CAD and may convert CAD held in your Crypto account to USD to settle trades. See the Wealthsimple Crypto Fee Schedule for more information.
Wealthsimple may provide you with the ability to purchase certain crypto assets using another crypto asset, which is sometimes referred to as a “coin swap”. Prices, fees, execution and settlement for coin swap orders operate similarly to orders to buy and sell crypto assets for fiat currency. Swapping one crypto asset for another may constitute a sale or disposition of the original crypto asset and a purchase or acquisition of the other crypto asset, which may have tax consequences. For statement and reporting purposes, the Canadian dollar value of swapped crypto assets will be based on the market prices provided by our liquidity providers.
Halting and Suspending Trading
Wealthsimple may halt trading for a crypto asset, in whole or in part, in various circumstances, such as:
Wealthsimple determines there is a risk of inability to settle client trades with liquidity providers.
Wealthsimple determines there is a risk of unacceptable execution quality by liquidity providers.
Wealthsimple determines there is a lack of trade liquidity available from liquidity providers.
Wealthsimple identifies higher than expected technical errors during the order creation and fill process.
Wealthsimple determines there have been material changes to the crypto asset from the original assessment.
In certain circumstances, trading may be suspended for an extended period.
Wealthsimple may be unable to provide any advance notice of trading halts and suspensions.
Delisting Crypto Assets
Wealthsimple may delist a crypto asset from trading permanently in the event that Wealthsimple determines that:
Wealthsimple is no longer able to provide reliable trading for the crypto asset;
Wealthsimple is no longer able to securely custody the crypto asset;
Wealthsimple determines, or is notified by Canadian securities regulators, that the crypto asset is a security and/or a derivative; or
Wealthsimple is otherwise no longer permitted by applicable terms and conditions of exemptive relief or other applicable law to support the crypto asset.
In the event that Wealthsimple decides to delist a crypto asset, Wealthsimple:
will notify clients of its decision to delist the crypto asset and provide a timeline for further steps.
will suspend buy orders for the crypto asset, and if feasible, may temporarily continue to allow sell orders for the crypto asset.
may suspend deposits for the crypto asset, and If feasible, may continue to allow withdrawals of the crypto asset.
Delisted crypto assets may no longer appear in your account or on account statements.
Wealthsimple will endeavour to provide as much notice as possible prior to taking the above steps but may, depending on the circumstances, be unable to provide any notice. Wealthsimple will also endeavour to allow you to sell or withdraw a crypto asset before it is delisted but, depending on the circumstances, may be unable to do so.
Custody of Crypto Assets
Wealthsimple holds clients’ crypto assets with multiple custodians that are considered “acceptable third-party custodians” under Wealthsimple’s regulatory terms and conditions.
In general, to be an “acceptable third-party custodian”, a custodian must:
be regulated as a bank or trust company, either in Canada or a foreign jurisdiction;
be functionally independent of Wealthsimple;
have audited financial statements; and
have recently obtained a Systems and Organization Controls (SOC) report (or comparable report).
In addition, Wealthsimple conducts due diligence on each custodian, including, among other steps:
reviewing the custodian’s audited financial statements and other financial information;
reviewing the custodian’s most recent SOC reports;
reviewing the custodian’s insurance coverage; and
reviewing the custodian’s completed due diligence questionnaires, which address regulatory status, storage management processes (expanding on SOC 2 controls), policies & procedures, record keeping practices, business continuity, and privacy controls.
Location of Crypto Assets
Your crypto assets are held in omnibus accounts in Wealthsimple’s name in trust for or for the benefit of Wealthsimple’s clients with the following custodians:
Custodian & Location
Coinbase Custody Trust Company LLC - New York, USA
BitGo Trust Company Inc. - South Dakota, USA
Wealthsimple distributes clients’ crypto assets across custodians based on a variety of risk management and operational factors.
For additional security, crypto assets held by custodians are held in “cold storage”, that is, the cryptographic key material used to digitally sign transactions involving those crypto assets is stored only on devices that are never connected to the Internet and held subject to various other security controls.
Wealthsimple also maintains its own wallets to hold limited amounts of crypto assets that
will be used to facilitate client deposit and withdrawal requests and to facilitate trade
settlement with liquidity providers. Wealthsimple may hold up to 20% of clients’ crypto assets (by value) in these wallets.
To maintain these wallets, Wealthsimple licenses software from Fireblocks Ltd. (Fireblocks) which includes a crypto asset wallet that stores private and public keys and interacts with various blockchains to send and receive crypto assets.
Crypto assets purchased or deposited by you are fully paid assets beneficially owned by you and not by Wealthsimple. Wealthsimple holds your crypto assets in trust.
Wealthsimple and its custodians hold your crypto assets in blockchain wallets or accounts designated for the benefit of clients or in trust for clients. Wealthsimple and its custodians hold the crypto assets of Wealthsimple clients separate and apart from their own assets (including crypto assets held in inventory by Wealthsimple for operational or other purposes) and, in the case of custodians, separate and apart from the assets of other clients of the custodians.
Wealthsimple and its custodians are prohibited from pledging, re-hypothecating or otherwise using any crypto assets owned by you, except with your express authorization and instructions.
Wealthsimple confirms that clients’ crypto assets held with the custodians and held by Wealthsimple reconcile with Wealthsimple’s books and records to ensure that all clients’ crypto assets are accounted for.
Each of Wealthsimple’s custodians maintains insurance for losses of crypto assets resulting from certain risks, such as:
collusion or fraud by the custodian’s employees;
damage to key material; and
cyber security breach/hacks.
In addition to the insurance coverage held by its custodians, Wealthsimple has obtained guarantees and/or insurance policies to provide coverage against losses of crypto assets held for clients as a result of:
collusion or fraud by employees of Wealthsimple or a custodian;
robbery or other theft of crypto assets from Wealthsimple or a custodian;
physical loss of or damage to devices holding cryptographic key material; and
cyber security breach/hack of Wealthsimple’s Fireblocks wallets.
Any available coverage under these insurance policies is subject to the terms of the policies and the circumstances of any loss.
Access to Clients’ Crypto Assets
Wealthsimple’s custodians have access to clients’ crypto assets held by the custodian. The custodians are prohibited from transferring or otherwise accessing Wealthsimple’s clients’ crypto assets except in accordance with Wealthsimple’s instructions.
Wealthsimple has access to client crypto assets held by it using Fireblocks and may instruct custodians to transfer clients’ crypto assets to Wealthsimple’s control.
Wealthsimple has established and applies policies and procedures that manage custodial risks, including a system of controls and supervision to safeguard clients’ crypto assets. This system of controls includes:
limits on which employees can authorize the movement of clients’ crypto assets;
documented approvals from multiple employees for any movement of clients’ crypto assets;
restrictions on the blockchain addresses to which clients crypto assets can be moved; and
limits on the value of crypto assets that can be withdrawn.
Insolvency or Bankruptcy
In the event of an insolvency of Wealthsimple or one of its custodians, your crypto assets will be dealt with in accordance with applicable bankruptcy or other insolvency laws. Wealthsimple expects that your crypto assets would be deemed to be your property, would not be subject to claims by Wealthsimple or its custodians, or their respective creditors, and would be returned to you. You may be temporarily unable to sell or transfer your crypto assets as a result of legal proceedings arising from such a bankruptcy or insolvency.
In the event that the insolvency of Wealthsimple or one of its custodians is due to a loss of crypto assets, such as due to fraud, theft or operational error, not all of your crypto assets may be returned to you and you may only have a monetary claim arising from the loss. Wealthsimple and its custodians have policies and procedures to prevent these types of loss and such losses may be covered by insurance obtained by Wealthsimple or its custodians.
Canadian Investor Protection Fund
Wealthsimple is a member firm of the Canadian Investor Protection Fund (CIPF). The crypto assets held by Wealthsimple, directly or indirectly, do not qualify for CIPF coverage. Cash balances held in your account are protected by CIPF within specified limits.
Transfers of Crypto Assets
Wealthsimple’s platform provides functionality to transfer supported crypto assets to and from your account, meaning you have the ability to transfer crypto assets to wallets outside the control of Wealthsimple, such as other trading platforms or personal wallets controlled by you, as well as to transfer crypto assets from a wallet outside the control of Wealthsimple to your Wealthsimple account.
Crypto Asset Deposits
When transferring crypto assets to your Crypto account, the crypto assets must be supported for deposits by Wealthsimple, you must transfer them to the specific deposit address provided by Wealthsimple for each specific transfer, and the transfer must take place on the supported network as instructed by Wealthsimple.
All intended transfers of crypto assets to your Crypto account are subject to review by Wealthsimple for compliance with applicable laws and Wealthsimple’s internal policies and controls.
No transfer of crypto assets to your Crypto account is accepted by Wealthsimple unless and until it is shown in your account, even if the corresponding crypto asset network transaction is shown as confirmed or completed.
Before or after a transfer of crypto assets is accepted into your account, Wealthsimple may refuse, cancel, reverse or freeze any transfer to your account for any reason, including without limitation if we suspect the transfer involves money laundering, terrorist financing, fraud, or any other form of criminal activity or proceeds of crime or if required by law or an order of any court or other authority to which we are subject.
After a transfer of crypto assets to your account is accepted, we may temporarily place holds or other restrictions on your ability to transact with your account, including buying, selling, transferring crypto assets or withdrawing funds.
Wealthsimple has no obligation to disclose to you why a transfer is refused or cancelled or reversed or why holds or restrictions are placed on your account.
Crypto Asset Withdrawals
When you instruct Wealthsimple to transfer crypto assets from your account, you are responsible for verifying all transaction information, including withdrawal addresses, prior to submitting instructions to us.
We may hold a transfer from your account indefinitely in accordance with our internal
policies or controls or as required by law. We may refuse to process any pending transfer from your account for any reason, including, without limitation, if we suspect the transfer involves money laundering, terrorist financing, fraud, or any other form of criminal activity or proceeds of crime, if required by law or an order of any court or other authority to which we are subject, or if the amount of the transfer exceeds limits set in accordance with our policies and procedures. Wealthsimple has no obligation to disclose to you why a transfer is refused or cancelled.
Wealthsimple’s systems are not configured to detect, secure or process transfers directly to any smart contract, dapp or similar functionality. Such attempted transfers may result in the loss of your crypto assets.
Transfers from your account cannot be reversed once they have been broadcast to the relevant crypto asset network. Wealthsimple is not responsible in the event you enter an incorrect address for the withdrawal, otherwise provide us with incorrect transaction information, or transfer crypto assets to a smart contract, dapp or similar functionality.
Wealthsimple does not control crypto asset networks or protocols and makes no warranty or guarantee that a transfer from your account will be processed or confirmed by the relevant network or protocol in a timely way or at all. Wealthsimple is not responsible for delays in processing or confirming transfers from your account.
Wealthsimple has no control over, or liability for, your crypto assets after they have been transferred from your account.
Unsupported Assets and Networks
Wealthsimple can only send and receive transfers of crypto assets that are supported by Wealthsimple. Attempting to deposit unsupported crypto assets to your Wealthsimple account will result in the loss of those crypto assets.
Certain crypto assets can be sent or received on multiple blockchain networks. Wealthsimple does not support sending and receiving crypto assets on all blockchain networks. Attempting to deposit supported crypto assets on an unsupported network will result in the loss of those crypto assets.
When sending supported crypto assets to your Wealthsimple account on supported networks, you must use the deposit address and any other instructions provided by Wealthsimple. Failure to follow these instructions will result in the loss of your crypto assets.
Withdrawal Limits & Other Fraud Prevention Measures
To protect against fraud, Wealthsimple imposes limits on the value of crypto assets that you may withdraw on a daily or weekly basis. You will not be able to withdraw crypto assets in excess of these limits.
In addition, prior to allowing withdrawals of crypto assets from your account, Wealthsimple may require you to perform additional identity verification measures or take other steps intended to protect against fraudulent activity.
When you purchase crypto assets, Wealthsimple may restrict sending crypto assets from your account to external wallets. When you receive crypto assets into your account and sell those crypto assets, Wealthsimple may put a hold on withdrawals of funds. Wealthsimple may maintain these holds unless and until we confirm that these transactions are legitimate transactions by you and/or that any transfer of funds from another financial institution to purchase crypto assets has settled and is not subject to recall.
Transfers involving Third Parties
Your account may not be used to receive payments or transfers of crypto assets from third parties, other than third parties acting on your behalf, such as another crypto trading platform.
Third parties unrelated to Wealthsimple may encourage or direct you to open an account with Wealthsimple or to use your account to transfer crypto assets to them in connection with attempts to defraud you. Wealthsimple cannot reverse a crypto asset transfer which has been broadcast to a crypto asset network, and losses due to fraudulent transactions may not be recoverable.
Possible signs of fraud involving crypto assets include, but are not limited to:
communications about crypto investment opportunities, particularly ones involving “managed solutions”, advertised on websites and social media sites or celebrities or influencers;
communications from individuals claiming to work for Wealthsimple who ask you to transfer crypto assets;
supposed employment opportunities that require a payment or deposit to be made using crypto assets;
communications from supposed law enforcement or other government agencies demanding that you pay a fine or penalty using crypto assets;
communications involving “giveaways” that require you to first make a payment using crypto assets; and
communications requesting that charges be paid using crypto assets.
More generally, Wealthsimple has no control over, and disclaims any liability for, the delivery, quality, safety, legality or any other aspect of any goods or services that you may purchase or access using crypto assets purchased or transferred from your Crypto account.
Wealthsimple is not responsible for ensuring that a third party or protocol you transact with will complete the transaction or is authorised to do so. If you experience a problem with any goods or service purchased from, or sold to, a third party using crypto assets purchased or transferred using your account, or if you have a dispute with such third party, you should resolve the dispute directly with that third party.
All crypto asset transfers require the payment of fees (which may be referred to as miners’ fees, gas, network fees or otherwise) to entities unrelated to Wealthsimple. These fees are outside the control of Wealthsimple. See the Wealthsimple Crypto Fee Schedule for more information.
Wealthsimple does not cover nor record fees charged by, or paid while accessing the services of, an entity unrelated to Wealthsimple.
Staking Crypto Assets
Wealthsimple provides functionality to arrange for clients who have entered into Crypto Contracts with Wealthsimple in respect of crypto assets on certain proof of stake or delegated proof of stake blockchain networks to stake or delegate their crypto assets to validators on those networks and earn the applicable staking rewards.
Certain blockchains use a consensus mechanism to achieve distributed consensus called “Proof of Stake” or “Delegated Proof of Stake” to verify, append, and secure new data on the blockchain. These mechanisms rely on certain nodes, called validators, to verify transactions included in each new block. In exchange for verifying transactions, validators earn crypto asset rewards. To ensure validators follow the protocol rules, validators must put assets “at stake”, in the sense that if a validator fails to follow the rules, some or all of the “staked” assets may be lost, or “slashed”.
Delegated Proof of Stake networks allow other participants to participate in staking without operating a validator. Instead, other participants can delegate the right to stake their assets to a validator. Delegated crypto assets never leave the owner’s wallet; delegation only permits the validator to stake the owner’s crypto assets on their behalf. When a validator verifies a block of transactions, the rewards earned are split between the validator and all of its delegators, in proportion to each delegator’s share of all assets delegated to the validator.
In general, rewards earned from staking are a combination of staking rewards and transaction fees. Staking rewards are new crypto assets created according to the rules of the underlying blockchain network to provide incentives for users of the blockchain to participate in staking. The amount of these staking rewards depends on the network “inflation rate”, which is the rate at which new tokens are created. The “inflation rate” may go up or down, depending on how many tokens are being staked across the entire network. Transaction (or user) fees are paid by users of the blockchain network to perform transactions on the network.
On certain blockchains, validators may set a “validator commission” rate that applies to any rewards earned by token holders that have delegated tokens to that validator. The amount of the “validator commission” is deducted automatically from delegators’ rewards by the blockchain protocol.
Some blockchain protocols have “warm-up” or “bonding” periods during which newly staked crypto assets are not eligible for rewards. Similarly, some protocols have “cooldown” or “unbonding” periods during which previously staked crypto assets in the process of unstaking are not eligible for rewards.
Wealthsimple may calculate and show you historical staking reward rates. These rates do not constitute a promise, representation or forecast by Wealthsimple regarding any rewards you may receive. Historical returns and return rates are not indicative of expected or estimated return rates.
All reward rates are as at a point in time, are subject to change and may be different from the actual reward rate you receive.
Slashing, Jailing or other Penalties
Certain Proof of Stake protocols impose penalties where a validator fails to comply with protocol rules. This penalty is often referred to as “slashing”. If a validator is “slashed”, a percentage of the tokens staked with that validator is permanently lost. Accordingly, if a validator fails to comply with protocol rules, a percentage of the assets staked with the validator may be lost.
Validators may also be temporarily or permanently “jailed”, that is, they will not be selected to participate in transaction validation and will not be eligible to earn staking rewards.
To mitigate the risk of slashing or jailing, Wealthsimple:
conducts due diligence on selected validators regarding their security and reliability;
stakes client assets with multiple validators, where feasible, so that a slashing penalty or jailing of a selected validator does not affect all staked assets and Wealthsimple can, if appropriate, re-stake client assets with alternative validators, and
for certain crypto assets, secures indemnities from validators to compensate Wealthsimple clients for slashing losses.
Bonding, Unbonding and Other Lock-up Periods
Staked crypto assets may be subject to technical restrictions specified by the protocol of the underlying blockchain. These restrictions, which may be referred to as warm-up, cooldown, bonding, unbonding or lock-up periods, prevent Wealthsimple from transferring your crypto assets during and potentially after they are staked.
Specifically, some blockchain protocols impose lock-up periods upon staking, where the crypto assets cannot be withdrawn until the lock-up period has elapsed. Other blockchain protocols may also impose lock-up periods when crypto assets are unstaked. During these lock-up periods, previously staked crypto assets cannot be transferred and may not continue to accrue staking rewards.
For certain blockchains, notwithstanding any lock-up periods that may apply, Wealthsimple may make commercially reasonable efforts to allow you to sell or transfer crypto assets immediately after unstaking them. Wealthsimple may not provide this service for all blockchains, and Wealthsimple may suspend this service at any time if Wealthsimple does not have sufficient crypto assets in inventory or it is not otherwise commercially reasonable for Wealthsimple to provide this service, in which case staked crypto assets that are unstaked cannot be sold or withdrawn until applicable lock-up periods elapse.
Role of Parties Involved in Staking Services
Wealthsimple does not operate validator nodes and does not have an ownership interest in any approved third party operating validator nodes. Instead, Wealthsimple selects and approves third-party validators.
When you use the staking services, Wealthsimple will, on your behalf, arrange to stake or delegate your crypto assets held in trust by Wealthsimple to one or more approved validators and, if and as required, Wealthsimple may, as your agent, arrange for approved validators to operate validator nodes on your behalf.
Wealthsimple calculates the amount of staking rewards earned by clients and distributes staking rewards to clients, as set out in further detail below.
Crypto assets staked using the staking services are staked with approved validators from dedicated wallets with one or more of Wealthsimple’s custodians. Wealthsimple’s custodians will continue to hold the private keys or other cryptographic key material required to control staked assets for so long as the assets are staked. Custody, possession and control of staked crypto assets will not be transferred to validators. Staked crypto assets will continue to be shown in your Crypto account.
To the extent there are material differences or risks relating to the custody of staked crypto assets, this is described in the Crypto Asset Statement for the asset.
Validators are third-party vendors that operate or supply validator nodes on various Proof of Stake blockchain networks.
Before approving a validator, Wealthsimple conducts due diligence on the validator, with consideration for the validator’s:
infrastructure and internal control documentation;
security measures and procedures;
reputation of operating validator nodes;
use by others;
measures to operate validator nodes securely and reliably;
amount of crypto assets staked by the validator on its own nodes;
quality of work, including any slashing incidents or penalties;
financial status and insurance; and
registration, licensing or other compliance under applicable laws, particularly securities laws.
Wealthsimple periodically reviews validators for any changes to the above. Wealthsimple also monitors approved validators for downtime or slashing events and will take appropriate actions required in the event of downtime, slashing or jailing, including arranging to re-stake your crypto assets with different validators, if required.
Due Diligence Process
Prior to providing staking services in connection with a crypto asset, Wealthsimple assesses the proof-of-stake consensus protocol for that asset. As part of its assessment, Wealthsimple reviews:
the design and operation of the staking protocols, including:
bonding/unbonding or warm-up/cool-down periods;
any limits on the number of active validators;
the mechanism for selecting validators;
slashing or similar penalties; and
any publicly available security assessments of the staking protocols; and
where feasible, the number and identity of validators participating in staking.
Factors Affecting Staking Rewards
The actual rewards that you may receive through the staking services, if any, may be affected by, among other factors:
changes in the inflation rate of the blockchain on which crypto assets are staked;
the total amount of crypto assets staked by users of the protocol;
the total amount of crypto assets staked by Wealthsimple clients using the staking services;
changes to the blockchain protocol as a result of protocol governance decisions;
changes to “validator commissions” set by approved validators;
scheduled or unscheduled downtime by approved validators;
halts, outages or other interruptions affecting the blockchain on which crypto assets are staked;
temporary outages or other interruptions affecting services provided by Wealthsimple’s custodians;
“slashing” of delegated crypto assets or other penalties applied to delegated crypto assets or staking rewards as a result of a breach of protocol rules by approved validators;
“jailing” of validators in accordance with protocol rules, resulting in delegated crypto assets being temporarily or permanently ineligible for staking rewards;
approved validators to which which assets were delegated ceasing to be eligible to participate in consensus and earn rewards;
warm-up, cooldown, bonding, unbonding or other lock-up periods specified by the protocol;
whether staking rewards are re-staked, either automatically by the protocol, as part of operational processes by Wealthsimple or manually by you;
re-delegation of crypto assets to different validators;
delays or other operational factors when delegating crypto assets on your behalf.
Calculation and Distribution of Rewards
Wealthsimple regularly and periodically determines, for each client using the staking services during a relevant “epoch” or other period, the amount of staking rewards earned by the client during that period.
The amount earned will depend on whether your crypto assets were staked during a period during which staking rewards were received in connection with staking by Wealthsimple clients and whether your staked crypto assets were eligible to earn rewards under the rules of the underlying protocol. Wealthsimple distributes your staking rewards, once received, by crediting your account accordingly.
Different blockchain protocols may calculate and distribute rewards on a daily, weekly, monthly or other periodic basis. When you unstake your crypto assets during one of these periods, you may be ineligible to receive any staking rewards for that period.
Some blockchain protocols have “warm-up” or “bonding” periods during which staked crypto assets are not eligible for rewards. When you stake your crypto assets, you may not be immediately eligible to receive any staking rewards until any such periods elapse.
In addition, some blockchain protocols may not distribute rewards immediately after they are earned. As a result of the volatility of crypto asset prices, the fiat value of staking rewards may fluctuate between the time rewards are earned and the time they are distributed to you.
Staking rewards are received and distributed in the same crypto asset that is staked. As a result of the volatility of crypto asset prices, the fiat value of staking rewards may fluctuate and the reward rate in fiat terms may be different than the reward rate in crypto asset terms.
Depending on the protocol, staking rewards may, or may not, be staked automatically. Where staking rewards are not staking automatically, you may need to manually delegate or stake any staking rewards earned by you.
Applicable Fees or other Charges
Wealthsimple charges a fee for using the staking services. Validators may also charge a fee that affects the rewards distributed to you. See the Wealthsimple Crypto Fee Schedule for more information.
Allocation of Slashing or Other Penalties
Wealthsimple disclaims all liability for losses resulting from any slashing or jailing imposed by a blockchain network in connection with the staking services, including reduction of your staked crypto assets or staking rewards and any consequential losses or opportunity costs due to slashing or jailing, such as a loss of opportunity to earn staking rewards because staked assets were slashed or a selected validator was jailed.
To the extent that Wealthsimple receives any compensation from validators in connection with a slashing event, Wealthsimple will distribute that compensation to you and other affected clients.
In the event that staked assets are slashed, Wealthsimple will allocate the amount of the penalty to all clients whose assets were eligible to earn staking rewards at the time of the slashing event, in proportion to the amount of staked by each client.
Any other information regarding any protocol-imposed penalties is disclosed in the relevant Crypto Asset Statement.
Summary of Risks
Wealthsimple has prepared this summary of risks associated with Crypto Contracts and crypto assets based on its assessment of the crypto assets made available through the platform. The summary below is not an exhaustive discussion of all risks nor does it contemplate your unique risk tolerance. There are many risks and other factors to consider when trading, transferring, holding, staking or otherwise using crypto assets. These risks and other factors are likely to evolve over time. Wealthsimple urges you to perform your own research on any crypto asset available on the platform and carefully consider the risks and your risk tolerance before entering into any transaction involving crypto assets using Wealthsimple’s platform.
Trading and Investment Risks
Risk of Complete Investment Loss
Investments or other purchases involving crypto assets are not guaranteed by any entity. The volatility and unpredictability of the market price of crypto assets may result in significant investment loss, including the loss of your entire investment.
Risk of Volatility in the Price of Crypto Assets
Crypto asset markets have a limited history, are volatile and may be subject to influence by many factors, including supply and demand for crypto assets, geo-political events, macroeconomic factors, speculation on future appreciation in value, unusual trading activity, recent news events, changes in market sentiment, technological developments and regulatory changes. As a result, there may be rapid changes in trading volumes and prices in crypto asset markets.
Risk of Order Rejections
Wealthsimple or its liquidity providers may reject orders for a variety of reasons, including that the order does not meet minimum or maximum order size requirements or trading activity exceeds rate limits. These risks may be greater during periods of high market volatility or operational outages at a major trading platform. If your order is rejected, you may not be able to buy or sell your crypto assets at your desired price. Wealthsimple is not responsible for any losses incurred as a result of a rejected order.
Risk of Cancelled Trades
Wealthsimple or its liquidity providers may cancel or correct a trade as a result of a technical issue affecting Wealthsimple or a liquidity provider or if an executed order did not reflect the fair market value for the crypto asset. Wealthsimple is not responsible for any losses incurred as a result of a cancelled or corrected trade.
Risk of Market Illiquidity
There is no assurance of a liquid market for all crypto assets. Crypto asset markets may experience temporary periods of illiquidity and/or liquidity for trading crypto may cease to be available entirely. As a result of market illiquidity, you may incur losses and/or may not be able to buy or sell your crypto assets at your desired price. Under certain market conditions, you may find it difficult or impossible to liquidate crypto assets quickly at a reasonable price or to assess the value of your crypto assets.
Risk of Electronic Trading and Dependence on the Internet
There are risks associated with using an Internet-based trade execution software application including, but not limited to, the failure of hardware and software. Wealthsimple does not control signal power, reception, routing via the Internet, configuration of your equipment or the reliability of your connection to the Internet. As a result, you may be unable to place an order, your order is not executed according to your instructions, your order may not be executed at all, and you may otherwise experience losses due to one or more of the following: system failures, hardware failures, software failures, network connectivity disruptions, and data corruption.
Risk of Price Differences Between Trading Venues
Crypto assets are traded in various venues around the world, and there is no assurance that the market price for a crypto asset observed in one venue will be the same as the market price in a different venue. Price differences between trading venues may persist indefinitely.
Risk of Crypto Assets Being Unsuitable Investments
Wealthsimple does not provide financial, legal, tax or investment advice or recommendations. Wealthsimple does not consider your financial situation, investment knowledge, investment objectives, savings objectives or risk tolerance when accepting orders or other instructions from you. Wealthsimple does not determine whether any investment action you may undertake using the platform is suitable for you. You are solely responsible for your own investment decisions undertaken using the platform.
Risk of Poor Trade Execution
Wealthsimple’s use of multiple liquidity providers is intended to reduce the market and operational risks of trading crypto assets and to provide you with fair and reasonable pricing. However, Wealthsimple’s liquidity providers may be unable to provide the best possible prices or execution quality on your behalf.
Risk of Inaccurate Market Data or Other Information
Market data or other information regarding crypto assets, including market data or other information obtained by Wealthsimple from third parties, may contain errors, be incomplete, or otherwise inaccurate.
Risk of Exposure to Foreign Currency
Crypto assets are generally traded in U.S. dollars (USD). Fluctuations in the value of Canadian dollar (CAD) relative to the USD may impact the relative value of your crypto assets in Canadian dollars. If the value of the Canadian dollar has increased relative to the U.S. dollar, the return on your crypto assets converted into Canadian dollars may be reduced, eliminated or made negative.
Risk of Disruption or Manipulation in Other Market Venues
Crypto assets are traded in a variety of ways, including through centralized marketplaces, decentralized finance (DeFi) protocols, “over the counter” trading desks and peer-to-peer transactions. Trading in crypto assets is not regulated under securities, commodity futures or other laws in all jurisdictions, and some market participants may attempt to engage in forms of market manipulation, such as wash trading. Significant trading platforms, market-makers and other significant market participants may become insolvent as a result of theft, fraud, security breaches or other failures. Disruptions or market manipulation in other marketplaces or other venues where crypto assets are traded could affect the price of crypto assets available on Wealthsimple’s platform.
Risk of Unexpected or Adverse Tax Consequences
Although tax authorities have issued certain guidance regarding certain taxation matters relating to crypto assets, the application of income, excise (sales) and other forms of taxation to trading or staking crypto assets may not be clear. There can be no assurance that applicable taxation laws and/or the administrative policies and assessing practices of tax authorities respecting the treatment of crypto assets will not be changed in a manner that adversely affects you. You should consult a qualified tax professional or otherwise obtain advice regarding the tax implications of trading, staking or otherwise using crypto assets.
Crypto Asset Risks
Risk of Short History of Crypto Assets
As crypto assets and blockchains are relatively new technologies, it is unclear whether the economic value, governance or functional elements of crypto assets will persist over time. Future developments may have an adverse impact on the functionality and value of crypto assets.
Risk of Lack of Initial and Ongoing Disclosure
Persons involved in the creation and maintenance of crypto asset networks and protocols may not disclose material information and may have no obligation to do so.
Risk of Lack of Legal Recourse
The persons or entities involved in the creation, distribution or ongoing development of crypto assets acquired through Wealthsimple’s platform may not be known, may not be identifiable and may be located in foreign jurisdictions. You may have no legal or other recourse against such persons or entities.
Risk of Decrease in Demand for and Usage of Crypto Assets
As crypto assets are relatively new products and technologies, there is no assurance that crypto assets will maintain their value or that they will be adopted or used.
Risk of Competition from New Crypto Assets or Other Technologies
To the extent a competitor to any existing crypto assets gains popularity, the use and price of existing crypto assets could be negatively impacted. Similarly, crypto assets and the price of crypto assets could be negatively impacted by competition from incumbents in other industries, including payments and investment industries.
Risk of Bugs and Vulnerabilities in Crypto Asset Protocols
The software that implements crypto asset networks and protocols may have bugs that result in the incorrect operation of the network or protocol or vulnerabilities that may be exploited by malicious actors. These bugs and vulnerabilities may result in, among other things, crypto asset networks and protocols ceasing to operate as designed, theft or other loss of crypto assets, and loss of confidence in crypto assets.
Risk of Denial of Service Attacks on Crypto Assets Networks or Protocols
Crypto assets networks or protocols may be subject to denial of service attacks that affect the performance of the network or protocols. This may result in, among other things, significant and potentially indefinite delays in the processing of crypto asset transactions.
Risk of Legal and Regulatory Developments Affecting Crypto Assets
The application of laws and regulations to crypto assets continues to evolve. Federal, provincial, territorial or foreign governments may restrict the use and exchange of crypto assets, and the status of crypto assets under existing laws may be affected by legal and regulatory developments, which may affect the use of, demand for and market price of crypto assets. There can be no assurance that tax, securities or other laws, or the administration thereof, will not be changed in a manner that adversely affects your crypto assets.
Persons involved in the development, distribution or promotion of crypto assets may be subject to regulatory investigations and enforcement actions, criminal investigations and prosecutions and/or civil litigation to the extent that their activities may violate applicable law. Developments in such regulatory or legal proceedings may affect the demand for or value of specific crypto assets or crypto assets more generally.
Risk Relating to the Cryptography Underlying Crypto Asset Networks
Crypto asset networks and protocols employ various cryptographic algorithms for security. The cryptography underlying crypto assets could prove to be flawed or ineffective, or developments in mathematics and/or technology, including advances in digital computing, algebraic geometry and quantum computing, could result in such cryptography becoming ineffective. In any of these circumstances, a malicious actor may be able to take crypto assets, the functionality of crypto asset networks may be negatively affected such that it is no longer attractive to users, a reduction in user confidence in crypto assets and/or the demand for crypto assets may decrease all of which would adversely affect crypto asset prices.
Risk of Changes to Crypto Asset Protocols
Crypto assets are implemented using software that may be subject to upgrades or other changes. As new versions of a crypto asset or related protocol are released, material changes to functionality could result in changes in demand, supply or price. Wealthsimple may determine that it is unable to continue supporting a crypto asset as a result of changes to the crypto asset.
Risk of Disagreements Between Community Participants
Participants in crypto asset networks and protocols, such as software developers and operators of nodes or validators, may not agree on the most appropriate means of maintaining, developing or operating the software underlying crypto assets. This may adversely affect the use, development or market price of the crypto asset.
Risk of Dependence on Protocol Developers
Software developers who contribute to the software implementing crypto assets may not be directly compensated for helping to maintain the software or protocol. There may not be any assurance that such individuals will continue to contribute to the development or maintenance of such software.
Risk of Unsustainable Energy Consumption
Certain crypto asset networks consume significant computing power to “mine” (validate) blocks, The network’s energy consumption as a whole may ultimately be deemed to be or indeed become unsustainable. This could pose a risk to broader and sustained acceptance of such networks.
Risk of Hard Forks
A “hard fork” of a crypto asset may affect the functionality, demand for and market value of a crypto asset. In the event of a hard fork, Wealthsimple may determine that it will not support either or both of the crypto assets resulting from the fork, which may require Wealthsimple to delist a previously supported crypto asset and may prevent you from accessing new crypto assets created by the hard fork.
Risk of Temporary Forks or Chain Splits
In certain circumstances, nodes on a blockchain network may be unable to reach consensus on valid transactions, which may result in a temporary fork or “chain split” where different groups of nodes maintain different and inconsistent copies of the blockchain. This may persist until consensus is restored, which may result in transactions being cancelled.
Risk of Blockchain Halts
Miners, validators or other nodes that validate transactions on blockchains may halt processing of transactions in certain circumstances. This may delay or prevent the processing of blockchain transactions, which may require Wealthsimple to halt or suspend trading for a crypto asset and/or suspend deposits and withdrawals of crypto assets.
Risk of Concentrated Control of Crypto Assets or Blockchain Networks
One person, or a group of persons acting together, may acquire control of a significant proportion of crypto assets or the nodes validating transactions on a blockchain network. This may allow this person or group to affect the market price for the crypto asset, prevent certain transactions from being processed and validated, prevent the network from reaching consensus on validated transactions, alter previously validated transactions or approve changes to the network or protocol.
Risk of Tokens Deployed on Other Blockchains
Certain crypto assets are implemented as smart contract “tokens” deployed on other blockchains (e.g., ERC-20 tokens on the Ethereum blockchain). Such tokens are reliant on the continued value, maintenance, and adoption of the underlying blockchain.
Risk of Uncertainty in Future Financial Institution Support
Banks and other financial institutions may decline to process transactions relating to crypto assets and/or provide services to individuals or companies engaged in activities relating to crypto assets.
Risk of Dependence on Counterparties
The operation of the platform depends on the ability of custodians, liquidity providers, validators and other counterparties to perform their obligations. By using the platform, you are exposed to the insolvency risk, fraud risk and proficiency risk on the part of Wealthsimple and its service providers.
Risk of Operational Interruptions, Errors & Omissions
Operational interruptions affecting Wealthsimple or its service providers may affect your ability to buy, sell, deposit, withdraw, stake or unstake crypto assets on the platform. To the extent that Wealthsimple, one of its custodians or one of its liquidity providers, erroneously transfers, whether accidentally or otherwise, crypto assets in incorrect amounts or to the wrong recipients, Wealthsimple may be unable to recover those crypto assets.
Risk of Loss of Cryptographic Material
The loss or destruction of “private keys”, “key shards” or other cryptographic material required by Wealthsimple or its custodians to access crypto assets may be irreversible and could result in the loss of all or substantially all of your crypto assets.
Risk of Cyber Security Incidents
Failures or breaches affecting the information systems of Wealthsimple or its service providers, including liquidity providers, custodians and validators, may result in disruption in your ability to trade, transfer, stake or otherwise access assets held on the platform, unauthorized disclosure of your private or confidential information, and loss or theft of crypto assets or other assets. This may result from deliberate attacks or unintentional events and may arise from external or internal sources. Deliberate cyber attacks include, but are not limited to, gaining unauthorized access to information systems (e.g. through “hacking” or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, equipment or systems, or causing operational disruption. Deliberate cyber attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks (i.e. efforts to make network services unavailable to intended users).
Risk of Failed Trade Settlement
Wealthsimple settles clients trades with liquidity providers on a net basis no later than two business days after the trade. In the event that a liquidity provider fails to perform their obligations when settling trades, you may bear the risk of loss of the amount expected to be received from your trades.
Risk of Loss When Transferring Crypto Assets
As crypto assets transfers are irreversible, you may permanently lose your crypto assets in the event you:
provide Wealthsimple with incorrect information, such as an incorrect destination address, when withdrawing crypto assets;
fail to follow Wealthsimple’s instructions when depositing crypto assets, such as entering an incorrect deposit address;
attempt to transfer crypto assets to Wealthsimple that Wealthsimple does not currently support, or does not currently support for deposits;
attempt to transfer crypto assets to a deposit address intended for deposits of a different type of crypto asset;
attempt to transfer crypto assets using a network that is not supported by Wealthsimple;
attempt to transfer crypto assets directly to a smart contract, dapp or similar functionality; or
fail to protect your login credentials or provide a third party with access to your Wealthsimple account.
There are limited circumstances in which Wealthsimple can assist you to recover crypto assets that have been lost, misdirected or otherwise rendered inaccessible due to errors by you or third parties. Wealthsimple has no obligation to take steps to recover crypto assets that have been erroneously transferred.
Risk of Delayed, Rejected or Failed Transfers
All crypto asset transfers require the payment of fees (which may be referred to as miners’ fees, gas, network fees or otherwise) to entities unrelated to Wealthsimple. The failure to pay a sufficient fee may delay your transfers indefinitely or result in the failure of your transfers. Wealthsimple is not responsible for delays or loss incurred as a result of an error in the initiation of a transfer to your account.
All intended transfers of crypto assets to or from your account are subject to review by Wealthsimple. Wealthsimple may refuse, cancel, reverse or indefinitely hold any transfer to or from your account for any reason.
A transfer to or from your account may not be processed or confirmed by the relevant crypto asset network or protocol in a timely way or at all. Wealthsimple does not control crypto asset networks or protocols and is not responsible for delays in processing or confirming transfers from your account.
Risk of Inability to Deposit or Withdraw Crypto Assets
Wealthsimple may not provide full transfer functionality for all crypto assets available for trading, in which case you may not be able to transfer certain crypto assets to or from the platform.
Risk of Transferring to Personal Wallet
If you transfer your crypto asset to a personal wallet controlled by you, you may be at increased risk of loss or theft of your crypto assets. You may have no means of recovering access to your crypto assets if you lose or forget the pass phrase, private key or other credentials required to access your personal wallet.
Risk of Lack of Investor Protection Insurance
Crypto assets purchased or held in an account with Wealthsimple are not protected by the Canadian Investor Protection Fund, the Canadian Deposit Insurance Corporation or any other investor protection insurance scheme.
Risk of Inadequate Insurance Coverage
Although Wealthsimple and its custodians maintain insurance against certain risks that may result in the loss of your crypto assets, this insurance coverage is subject to exclusions, limits and other restrictions that may result in denial of coverage for losses or any coverage being insufficient.
Any claims under any insurance policy relating to the loss or theft of your crypto assets may require time for investigation. An insurer may delay payment until this investigation is complete. During this time, you may be unable to access your crypto assets or any replacement assets.
Insurance payments from insurance companies are paid in fiat currency and may be based on the value of crypto assets at the time of the loss, which may be different from the value of the crypto assets at the time the insurance claim is paid. As a result, in the event that your crypto assets are lost or stolen, you may be compensated in fiat currency for the market value of your crypto assets at the time of the loss.
Risk of Inability to Access Forks and Airdrops
Wealthsimple reserves the right to determine whether or not to support new crypto assets resulting from forks or airdrops. In some circumstances, Wealthsimple and its service providers may be unable to, or may elect not to, provide access to such assets. As a result, by holding crypto assets using the platform, you may not be able to receive or access crypto assets resulting from forks or airdrops.
Risk of Inability to Use Supplemental Functionality
Certain crypto assets may be “staked” or otherwise used in connection with their associated blockchain network or protocols to increase the security or solvency of the network or protocol. As well, certain parties have developed supplemental functionality for certain blockchain tokens, such as metacoins, colored coins and side chains. Staking and other protocol uses or supplemental functionality associated with crypto assets may not be available to you while those crypto assets are in Wealthsimple’s custody.
Risk of Inability to Vote or Participate in Protocol Governance
Certain crypto assets confer a power to vote on topics that may directly and indirectly affect functionality and economics of a particular crypto asset, including changes to block reward amounts, inflation percentages, consensus rules or governance models. Wealthsimple does not enable any voting functionality for such crypto assets. When holding crypto assets on Wealthsimple’s platform, you will not be able to vote or otherwise participate in any protocol governance activities.
Risk of Changes in Treatment of Crypto Assets under Securities Laws
Although Wealthsimple conducts an assessment of whether a crypto asset made available on the platform is a security and/or a derivative, Wealthsimple’s assessment may be incorrect or may be revised as a result of new or updated regulatory guidance, court or tribunal decisions, and/or changes to applicable legislation, regulations or rules.
In the event that Wealthsimple has mistakenly determined that a crypto asset is not a security and/or a derivative, you will not receive all of the protections you would otherwise receive under securities laws, such as disclosure of material information regarding the crypto asset.
Changes in regulatory guidance, changes to applicable law or court or tribunal decisions that affect the applicability of securities laws to crypto assets may affect the price of crypto assets and/or your ability to buy or sell crypto assets. In particular, in the event of a determination that a supported crypto asset is a security and/or a derivative, Wealthsimple may be required to halt trading in that crypto asset and delist the crypto asset entirely. In this situation, you may be unable to sell or otherwise dispose of the crypto asset.
Risk Relating to Residency of Custodians
As Wealthsimple’s custodians are located outside of Canada, a substantial portion of Wealthsimple’s client assets may be considered located outside Canada, which may delay or complicate the enforcement of legal rights against the custodians in Canada.
Risk Relating to Limited Liability of Wealthsimple
Wealthsimple’s liability to you is limited by the terms of the Crypto Client Agreement. Among other things, Wealthsimple has no liability for losses resulting from:
fraudulent or unauthorized transactions;
scheduled or unscheduled outages or disruptions;
transfers to or from your account;
loss, theft or unauthorized use of your login credentials or access to your account by a third party;
the suspension of your account;
any holds placed on your account; and
fluctuations in the market prices of crypto assets.
For further information, refer to your Crypto Client Agreement.
Risk of Fraud by Third Parties
Third parties unrelated to Wealthsimple may encourage you to use your account to purchase and transfer crypto assets to them in connection with fraudulent schemes. Wealthsimple cannot recall or reverse transfers of crypto assets to third parties.
Risk of Beta Features
From time to time, Wealthsimple may add new features and invite you to participate in a “beta phase” of the feature and provide feedback on the feature. These features will be identified as “beta” features. You are not under any obligation to join a beta phase or use a beta feature, but if you do, there are additional risks that may apply while the product feature is still in the “beta phase”, including that the feature may not work correctly, may be changed and may be discontinued entirely.
Risk of Dependence on Third Parties for Staking
As the staking services relies on third party validators and Wealthsimple’s custodians, it is subject to various risks associated with the performance of those third parties, including:
validators may be subject to regulatory or legal action that prevent them from continuing to operate validator nodes;
nodes operated by validators may be subject to unscheduled downtime as a result of denial of service or other cyber attacks, system outages or other operational issues;
validators may cease to support certain blockchain protocols;
agreements between Wealthsimple and validators may be terminated;
custodians may limit the ability of Wealthsimple to stake or delegate due to outages or other reasons;
errors in data provided by validators or custodians; and
custodians may cease to support staking.
Risk of Earning No Staking Rewards
Wealthsimple does not promise or guarantee you a specific staking reward rate, and there is no guarantee or assurance that you will receive any staking rewards by using the staking services.
Risk of Realizing Staking Rewards in Fiat Currency
Due to price volatility of crypto assets and potential illiquidity of crypto assets when disposing of staking rewards, your realized staking return in fiat terms may be significantly different from historic or estimated future rates expressed in terms of crypto assets.
Risk of Inability to Sell or Withdraw Staked Crypto Assets
Staked crypto assets cannot be sold or withdrawn from the platform while staked. Certain blockchain protocols also impose a “cool-down” or “unbonding” period after crypto assets are unstaked. During this period, previously staked crypto assets cannot be sold or withdrawn.
As a result, you may be unable to sell or transfer staked crypto assets until applicable lock-up periods elapse. Due to the volatility of crypto asset prices, staked crypto assets may decline in value while staked or while lock-up periods are in effect.
Risk of Omnibus Staking Model
Wealthsimple arranges to stake crypto assets belonging to its clients on an omnibus, not individualized, basis. For operational reasons, Wealthsimple may not be able to immediately stake or unstake your crypto assets when you instruct Wealthsimple to do so. As a result, the amount of staking rewards you receive using the staking services may differ from staking rewards you would receive by staking crypto assets from your own wallet.
Risk of Loss Due to Slashing, Jailing or Other Penalties
If a validator is slashed or otherwise penalized for a failure to comply with protocol rules, any of your crypto assets staked with that validator and/or any rewards earned by you may be reduced or lost. If a validator to which your crypto assets are staked is temporarily or permanently “jailed” or otherwise excluded from participation in transaction validation and not be eligible to earn staking rewards, the staking rewards you earn may be reduced.
Last Updated: January 1, 2024