Disclosure of the risks associated with decentralised finance (DeFi) features – Young Platform S.p.A.

Introduction and classification of the service

This Disclosure is provided by Young Platform S.p.A. (hereinafter also “Young Platform” or the “Company“) to clients who access, through the Platform interface, the decentralised finance feature (DeFi Wallet), including fully decentralised protocols used for lending and borrowing, decentralised staking and other features accessible through the non-custodial wallets integrated into the Platform (the “DeFi Services“).

The DeFi Services do not constitute the provision of crypto-asset services within the meaning of Article 3(1) of Regulation (EU) 2023/1114 (“MiCA”) and fall outside the scope of the authorisation obtained by Young Platform as a crypto-asset service provider (CASP). Under no circumstances does the Company act as counterparty, intermediary, lender, custodian, guarantor or manager of the transactions carried out on decentralised protocols; it merely provides a technological infrastructure and an interface for accessing those protocols.

As a consequence of the unregulated nature of the DeFi Services, transactions carried out on decentralised protocols do not benefit from the protections afforded by MiCA to regulated services, including the segregation of assets under Article 75 MiCA, the best execution rules under Article 78 MiCA, the placing rules under Article 79 MiCA and the conflict-of-interest safeguards under Article 72 MiCA.

Specific risks of decentralised protocols

The client is informed that the use of the DeFi Services entails the following specific risks, which are not mutually exclusive:

(i) Smart contract risk – Decentralised protocols operate through immutable software code (smart contracts) that is exposed to programming vulnerabilities, bugs, logic errors or exploits that may result in the total or partial loss of the crypto-assets deposited, with no possibility of recovery by the Company or by third parties.

(ii) Liquidity risk – Decentralised protocols may offer lower levels of liquidity than regulated markets or centralised exchanges, making it impossible to close positions within the desired timeframe or at the desired prices, particularly under conditions of market stress.

(iii) Oracle risk – Decentralised protocols that rely on external price feeds or data (oracles) may be subject to manipulation, malfunction or delays in updating data, affecting the determination of the economic terms of transactions and the possible triggering of automatic liquidation mechanisms.

(iv) Governance risk – The economic and technical parameters of decentralised protocols may be modified by on-chain governance mechanisms (token holders, DAOs) over which the Company exercises no control, with potentially retroactive effects on the client’s positions.

(v) Automatic liquidation risk – Lending or borrowing positions on decentralised protocols are backed by cryptographic guarantees (collateral) whose ratio to the debt position is monitored in real time by the protocol. Should the value of the collateral fall below the predetermined thresholds, the protocol automatically liquidates the position, potentially with significant losses for the client, without prior notice and without any possibility of intervention by the Company.

(vi) Market risk – The crypto-assets used in the DeFi Services are subject to high price volatility, with the possibility of a total or significant loss of the capital invested.

(vii) Technological and service interruption risk – Access to decentralised protocols depends on the proper functioning of the underlying blockchain infrastructure (network congestion, hard forks, halts, network attacks) and of the interface provided by the Company. The Company does not guarantee the continuous availability or the executability of transactions on the protocols.

(viii) Risk of loss of cryptographic keys – Within the DeFi Services, crypto-assets are held in non-custodial wallets under the direct control of the client; the loss, theft or compromise of the private keys results in the irreversible loss of the crypto-assets, with no possibility of restoration by the Company.

(ix) Regulatory and tax risk – Developments in the regulatory framework applicable to decentralised finance, in Italy and in other relevant jurisdictions, may result in changes, restrictions or prohibitions concerning the use of the protocols, as well as tax and reporting obligations for the client.

(x) Reputational and compliance risk of the protocols – Decentralised protocols may be subject to regulatory measures or investigations in other jurisdictions, with the potential interruption of operations or degradation of features.

Absence of regulatory protections

The client acknowledges and accepts that, in relation to transactions carried out through the DeFi Services:

• no investor compensation scheme or deposit guarantee scheme applies;
• the MiCA rules and protections reserved for the regulated services provided by Young Platform do not apply, including the rules on custody, best execution, conflict-of-interest management and market abuse;
• the Company’s insurance cover, where in place, does not extend to decentralised protocols or to transactions carried out on them;
• any loss arising from the use of the DeFi Services is borne entirely by the client.

Acknowledgement and express acceptance

Access to the DeFi Services is subject to the client having read this Disclosure in full and to the client’s express acceptance, given through a clear and unambiguous affirmative action (e.g. a dedicated tick box, two-step confirmation) in the Platform interface. Acceptance is recorded in the Company’s systems with a timestamp, the client identifier and the version of the document in force.

The Company reserves the right to require the client to re-read this Disclosure in the event of material changes to its content, significant changes to the accessible protocols or developments in the applicable regulatory framework.

References

For any matter not governed by this Disclosure, reference is made to: (i) the Young Platform MiCA Terms and Conditions; (ii) the DeFi Protocol Selection Procedure adopted by the Company; (iii) the specific terms of service of the individual decentralised protocols accessed by the client through the Platform.