USD1 Risk Disclosures
We summarize certain risks you should consider when deciding whether to purchase, hold, redeem or otherwise dispose of USD1. By purchasing, holding, redeeming, using or otherwise disposing of USD1, you acknowledge that you have read and understand these risks. You should not purchase, hold, redeem, use, or otherwise dispose of USD1 unless you understand the associated risks. The below risks include some of the principal risks of USD1, but do not and cannot describe every risk or consideration associated with USD1. Risks of purchasing, holding, redeeming, using and otherwise disposing of USD1 include, but are not limited to, the following:
USD1 is not legal tender and is not government backed
USD1 is not money or legal tender. USD1 is not issued, backed, or guaranteed by any government and, consequently, some of the protections that apply to fiat currencies do not apply to USD1. USD1 is not required by law to be accepted as legal payment for goods and services and financial obligations. USD1 holders may transfer, trade, hold, or use USD1 only with persons that accept USD1.
USD1 does not benefit from deposit insurance protections
USD1 is not subject to deposit insurance protection, including, but not limited to the Federal Deposit Insurance Corporation insurance, or the Securities Investor Protection Corporation or any other governmental or non-governmental insurer. Accordingly, any loss you experience may not be offset by insurance payments or at all.
There are limitations on the ability to redeem USD1
All reserve assets backing USD1 are held or maintained by BitGo Trust Company, Inc., a South Dakota-chartered trust company, and/or by BitGo Technologies LLC, a federally registered money services business and state-licensed money transmitter ("BitGo"). BitGo issues USD1. Only eligible BitGo customers can redeem USD1 directly with BitGo. BitGo processes all initial purchases and redemptions of USD1 and provides related technical infrastructure and services. BitGo holds the equivalent value of one U.S. Dollar ($1) in segregated accounts, on behalf of and for the benefit of USD1 holders, for each USD1 that is issued by BitGo and remains in circulation. The ability of eligible persons to redeem a U.S. Dollar ($1) for each USD1 is conditional on (i) your possession of a corresponding amount of USD1 associated with a valid registered USD1 Account, (ii) your ongoing compliance with BitGo's Terms of Use, and (iii) the absence of any action by a regulator, law enforcement or a court of competent jurisdiction that would restrict redemption.
Reserves may be subject to liquidity risks
Although BitGo seeks to ensure that the majority of its reserves are held in liquid assets (such as cash and U.S. Treasuries), there can be no assurance that the value or liquidity of the reserves will always be sufficient to meet redemption requests as and when made. If the reserve assets decline in value or become illiquid, it could impair the ability to honor redemptions at par value. Changes in interest rates or yield on reserve assets can affect profitability and reserve adequacy. A rapid spike in USD1 redemption requests may outpace liquidity, leading to delays, forced asset sales, or a run on USD1. As a consequence, it is possible that the redemption of USD1 may be deferred or suspended in certain circumstances.
Reserves are held at or through financial institutions which are subject to various risks
BitGo relies on financial institutions and intermediaries to hold cash, cash equivalents, and other assets forming part of the reserves. Such reserves held at or through financial institutions or intermediaries may be subject to the risk of loss, theft, insolvency, and governmental or regulatory freezes and seizures. Furthermore, these parties have their own policies and may change their view or acceptance of USD1 or BitGo or World Liberty Financial, Inc. and its affiliated entities and persons (the "WLFI Parties"), which could affect the ability of BitGo to access its reserves at any time. Financial institutions or intermediaries may refuse to process funds for digital asset transactions, process wire transfers to or from digital asset trading platforms, companies or service providers, or maintain accounts for persons or entities transacting in digital assets. This may result in delays and other barriers to the transfer, redemption and sale of your USD1. You should be aware of these risks at all times.
No security interest in USD1
Your right to request redemption of your USD1 is a contractual right with BitGo and does not represent a security interest in favor of a holder of USD1. Following the issuance of USD1, BitGo's only obligation to any holder is to redeem USD1 subject to the applicable USD1 terms, and BitGo has no other obligation.
USD1 trading on secondary markets are subject to market risk
Secondary market prices for USD1 can fluctuate and be unpredictable due to a variety of factors. There is no assurance that USD1 will maintain its value in the future or that USD1 may be accepted for payments or other purposes by other parties. USD1 may trade at, above or below the value of a U.S. Dollar for which such token is redeemable. The market price of USD1 in secondary markets could fluctuate in response to conditions in those markets irrespective of the value of the U.S. Dollar underlying USD1. The amount of the discount or premium in the market price for USD1 relative to a U.S. Dollar for which USD1 is redeemable may be affected by trading activity in USD1, the ease and costs of redemption, and other factors. BitGo and the WLFI Parties cannot control how third parties value USD1.
You alone bear the risks of using USD1 on third party platforms
Third parties may offer or provide services, platforms, content, features, products, websites or services or applications, exchange functionality, offers and promotions in connection with USD1, with or without our approval. We may also make third party services available to you. However, our inclusion or promotion of third party services does not reflect a sponsorship, endorsement, approval, investigation, verification, certification or monitoring of such third party services or their validity, legal reliability, or suitability for any parties, person, or purpose. Your acquisition of third party services, and any exchange of data between you and any such party, is solely between you and such party. We do not guarantee the security or functionality of any third-party software or technology and are not responsible for any losses of USD1 due to the failure of third-party software or technology. We do not warrant third party services in any way. Under no circumstances will we have any liability for your usage of third party services.
Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and volume of USD1
The regulatory status of cryptocurrency, including stablecoins like USD1, and blockchain technology is unclear or unsettled in many jurisdictions. Interpretations of existing laws and regulations as well as legislative and regulatory changes or actions at the U.S. state, U.S. federal, or international level may adversely affect the minting, use, transfer, redemption and/or value of USD1, and impose restrictions on issuers and other parties. Depending on jurisdiction and structure, stablecoins may be classified as securities, commodities, or other regulated instruments, subjecting USD1 and related entities and persons to additional licensing and compliance obligations. BitGo or the WLFI Parties may be required to obtain money transmitter licenses, e-money licenses, or other regulatory approvals in one or more jurisdictions, and failure to secure or maintain these licenses could severely impact our operations and the minting, use, transfer, redemption and/or value of USD1. You are responsible for complying with all applicable law related to your use, purchase, transfer, holding, redemption or other disposition of USD1. You agree that you are solely responsible for determining whether or which laws may apply to your transactions, including tax laws. You are solely responsible for reporting and paying any taxes arising from your use of USD1 including any accurate reporting of the tax or legal status of USD1 in your jurisdiction.
We reserve the right to block and freeze USD1 addresses
BitGo reserves the right to deny access to certain USD1 addresses and, if such addresses are USD1 custodied addresses, freeze associated USD1 (temporarily or permanently) that BitGo determines, in its sole discretion, are associated with illegal activity or activity that otherwise violates the applicable USD1 terms. In the event that you send USD1 to such a blocked address, or receive USD1 from a blocked address, BitGo may freeze such USD1 and take steps to terminate your USD1 Account. In certain circumstances, BitGo or WLFI Parties may deem it necessary to report such suspected illegal activity to applicable law enforcement agencies and you may forfeit any rights associated with your USD1, including the ability to redeem USD1 for U.S. Dollars. BitGo or WLFI Parties may also be forced to freeze USD1 and/or surrender associated reserves in the event any party receives a legal order from a valid government authority requiring it to do so. BitGo or WLFI Parties reserve the right to block the transfer of USD1 to and from any address on chain.
Transactions are irreversible and any losses due to fraudulent or accidental transactions may not be recoverable
When USD1 is sent to a third party USD1 address, such transaction is irreversible, and neither BitGo nor the WLFI Parties will have the ability to reverse or recall any transaction once initiated. Sending USD1 to another address automatically transfers and assigns to that USD1 holder, and to any subsequent holder, the right to redeem USD1 for U.S. Dollar. A non-exhaustive list of examples of possible risks and losses may include: (i) an address may have been entered incorrectly and the true owner of the address may never be discovered, (ii) you may not have (or subsequently lose) the private key associated with such address, (iii) an address may belong to an entity that will not return the USD1, or (iv) an address belongs to an entity that may return the USD1 but first requires action on your part, such as verification of your identity. Losses due to accidental or fraudulent transactions may not be recoverable. You alone bear all responsibility for any losses that might be incurred as a result of sending USD1 to an incorrect or unintended USD1 address.
Risks of encumbrances
Like most property, USD1 can be used as collateral for an indebtedness. It is therefore possible that USD1 you acquire (other than directly from the issuer) is subject to a security interest granted by the transferor or a prior owner.
Software protocols and operational challenges
You are aware of and accept the risk of operational challenges. USD1 and the related entities and parties may experience sophisticated cyber-attacks, unexpected surges in activity, or other operational or technical difficulties that may cause interruptions to the issuance, redemption, or transfer of USD1. You understand that the USD1 related services may experience security breaches or operational issues, which could lead to delays in redeeming USD1 or loss of funds. Employees, contractors, or integrated service providers may inadvertently or maliciously compromise the system or expose vulnerabilities. USD1 issuance and redemptions may rely on smart contracts, which are subject to bugs, exploits, or malicious attacks. Interruptions in platform services, blockchain network congestion, or downtime can affect users ability to transact and redeem USD1, impacting credibility and utility. You agree to accept the risk of USD1 transaction failure resulting from unanticipated or heightened technical difficulties, including those resulting from sophisticated attacks. You agree not to hold BitGo or the WLFI Parties accountable for any related losses.
No advice is being provided by the BitGo or the WLFI Parties
BitGo and the WLFI Parties do not provide investment, portfolio management, legal, accounting, tax or other advice, or advice with respect to trading techniques, models, algorithms, or any other advice. All information provided in connection with your access to and use of USD1 is for informational purposes only and should not be construed as professional advice. You should not take, or refrain from taking, any action based on any information contained on the website or any other information that we may make available at any time. Before you make any financial, legal, or other decisions involving USD1, you should seek independent professional advice from an individual who is licensed and qualified in the area for which such advice would be appropriate.
The interests of the BitGo and the WLFI Parties may differ from those of USD1 holders
The interests of the BitGo and the WLFI Parties may differ from those of USD1 holders. BitGo and the WLFI Parties benefit from net fees earned from interest on the reserves backing USD1. Because BitGo and the WLFI Parties may seek to maximize earnings on reserves, and USD1 holders are not entitled to those earnings, their interests may diverge. From time to time, BitGo and the WLFI Parties may also enter into agreements or transactions with persons who are related parties, and which differ from the interests of USD1 holders.
Continued adoption of USD1 as a stablecoin is subject to a variety of risks
The stablecoin market is highly competitive. Dominant players with significant capital, distribution and brand awareness already exist, and new stablecoins are being introduced rapidly. Stablecoins also compete with other means of holding or using dollars or dollar-based assets including bank accounts and money market funds. Such competition could limit adoption of USD1, and adversely affect the value and utility of USD1. Continued adoption may depend on exchanges, market makers, businesses and others deciding to support USD1. However, such adoption could be limited for a number of reasons, including without limitation, litigation or regulatory activity, adverse media attention, political perceptions or developments, the use of USD1 for illicit or objectionable ends and collapses or a crisis involving digital assets, trading platforms other stablecoins, or lending protocols. Such factors could limit the adoption of stablecoins in general or USD1 in particular.