SocialPolis Coin: Decoding the project (part 7/7).
The financial risks of crypto assets and how does SocialPolis Coin protect investors?
Cryptocurrencies are digital assets that trade off their own Blockchain platform. Investment interest in those cryptos and the subsequent market risk is largely defined by the safety, validity, and the practical applications of the Blockchain technology behind them. In this text, we highlight the inherent idiosyncratic material risks of cryptocurrencies and how SocialPolis Coin Project protects its investors.
Business risk
Cryptocurrencies are not backed by a central authority or any other trusted party, and their market value depicts the transaction activity created by market participants. The fluctuations of this activity when they are speculative may lead to lack of confidence in periods of limited marketability or abrupt drop in value of cryptos.
Cyber/Fraud risk
Cryptocurrencies are a form of cash money. This is attractive to a large set of criminal activities and hackers. Further, not all cryptocurrencies are developed equally in terms of their traceability, transaction ledgering and levels of trust or fiduciary responsibility. As a result, the danger of “mysterious” thefts of amounts of crypto have been proved to exist.
Operational risk
The transactions in Blockchain platforms are irreversible. While within analog economy business model, a centralized clearinghouse guarantees the validity of a transaction giving the possibility of reversing one in a coordinated way, in crypto-sphere irreversibility is not an option.
Regulatory/compliance risk
Providing that many crypto-exchanges are not regulated and have no quality commitment, regulatory capital, no risk management policies, the risk of losing several amount of monies in one night is possible. This implies the need of a combined Anti-Money Laundering (AML) approach that for now does not exist.
Market risks
Cryptocurrencies trade only on demand. Due to the finite amount of the currency circulated, liquidity problems may arise. This could lead to market manipulation. Further, the technological market exit barriers, the limited acceptance and the lack of alternatives may drive to increased volatility.
To sum up, without central bank governance and the existing lack of regulatory controls in place, volatility and illiquidity are likely to continue with crypto assets. Nevertheless, protection measures are always in place and suggest a priority for the majority of crypto projects.
SocialPolis Coin Project and investors’ safeguards
SocialPolis Coin Project set the protection of investors as a top-tier priority. SPL Project team takes extremely seriously the investors’ protections from financial risks related either with the cryptocurrency economy or the real economy’s financial sector. They managed to address this issue by selecting a mature technological Blockchain solution and a real-economy sector that requires on trust and transparency. Liquidity problems are minimized by the immediate marketability through exchange platforms and by serving the domestic trade in the social economy sector. Additionally, Blockchain Open Technologies will apply custom “know your customer, KYC” and anti-money laundering (AML) procedures for each potential investor in the SPL Coin before they are permitted to purchase any SPL Coin. Last but not least, following the expected values of SPL Coins creating economic results of Blockchain Open Technologies, the initial price of 2€/SPL Coin is considered to be a fair and correct value.
