Conflict of Interest disclosure

Introduction


Blockrise is obliged to implement and maintain effective policies and procedures to identify, prevent, manage and disclose conflicts of interest. Blockrise established a conflict of interest policy to ensure that Blockrise effectively manages, prevents, and discloses any conflicts of interest that may arise in the course of its activities as a CASP.

Blockrise actively identifies, prevents, and manages conflicts of interest, ensuring that all relevant parties are involved and appropriate steps are taken to address these conflicts of interest.

Through this disclosure, Blockrise aims to inform you on the general nature and sources of conflicts of interest that have arisen or might arise, and the steps that Blockrise has taken to mitigate these conflicts of interest.

Identification of Conflicts of Interest

Blockrise has identified two categories of potential conflicts of interest:

• Conflicts of interest potentially detrimental to Investors; and
• Conflicts of interest potentially detrimental to Blockrise.

Disclosures of possible conflict of interest:

Blockrise identified the following (potential) conflicts of interest:

1. Custody fee: Blockrise charges a custody fee on crypto assets that investors hold within their portfolio wallets. Since the custody fee applies only to crypto assets and not funds, Blockrise may be incentivised to increase an investor’s crypto asset allocation in a manner that is against their interests. The asset management strategy of Blockrise is clearly defined. Portfolios are only rebalanced according to strict criteria and in accordance with the stated strategy. Furthermore, custody fees are a relatively low portion of the total fees charged for asset management services.
2. Performance fee: Blockrise charges a performance fee based on the increase in Euro value of all underlying assets participating in asset management, calculated on the total Euro value and based on the lifelong high-water mark. Since the performance fee is only based on the increase in value of an investor’s assets participating in asset management, Blockrise may be incentivised to operate outside of the risk appetite of the company to maximise potential gains. The portfolio strategy of Blockrise is clearly defined. Portfolios are only rebalanced according to strict criteria and in accordance with the stated strategy. Furthermore, portfolio managers are held to high integrity standards and are subject to procedures to ensure knowledge and competence.
3. Redemption fee: Blockrise charges a redemption fee when an investor (partially) exits asset management. There is a short-term financial incentive for Blockrise to advise investors to exit asset management, which can be against the investor’s interests. Blockrise does not provide advice to investors.
4. Trading fee: Blockrise charges a fee on the exchange of funds to crypto assets and vice versa. There is a financial incentive for Blockrise to encourage higher trade frequency to earn more fees. Trading fees are only applicable to the brokerage service. The products and services of Blockrise are relatively unattractive for investors who wish to trade frequently. Additionally, Blockrise is not engaged in the provision of (investment) advice on crypto assets.
5. Onboarding fee: An onboarding fee may create an incentive for employees to onboard investors who are either unsuitable for Blockrise’s products and/or services, or those who pose an increased risk. Blockrise does not charge an onboarding fee.
6. Execution Venues: Blockrise works with multiple execution venues for executing trades. There might be financial incentives to route orders to specific execution venues, which may not always result in the best execution for investors. Blockrise outlines strict criteria for order execution in an execution policy. The execution policy is structured such that conflicting interests between the investors and Blockrise are kept to a minimum.
7. Scale of the organisation: Due to the current nature and scale of Blockrise, some employees (in control positions) hold multiple roles with potentially conflicting responsibilities. Without a proper segregation of duties, it may be impossible for Blockrise to ensure the absence of conflicting interests where decision-making relies on a single individual. Blockrise has applied a four-eyes-principle to all key processes to limit the reliance on decision making by a single employee.
8. External communications: As a CASP, it is in the best interest of Blockrise to make external communications which encourage investments in crypto assets. This may result in investors making uninformed investment decisions not suitable form them. Blockrise adheres to strict guidelines relating to external (marketing) communications and does not engage in the provision of (investment) advice on Crypto Assets. Furthermore, Blockrise conducts thorough client due diligence relating to investor integrity and suitability prior to the provision of crypto asset services.
9. Remuneration: Blockrise employees have the option to receive equity in the form of share certificates as part of their remuneration package. There is a risk that employees whose success metrics are non-commercial in nature (i.e. compliance and risk) may be incentivised to operate outside of Blockrise’s risk appetite. Employee share certificates are subject to a reverse-vesting period. Employee share certificates are also issued with an appropriate ratio to the fixed remuneration.

Group structure of Blockrise and affiliated companies

The Blockrise organisation contains multiple entities. Blockrise Capital B.V. is the only entity that provides crypto asset services, and is a subsidiary entity of Blockrise Group B.V. None of the other entities are regulated or active in financial services. Blockrise Capital B.V. has not outsourced any (parts of) crypto asset services to entities within the organisation.

Stichting Blockrise is a foundation that was established for the purpose of asset segregation, both for crypto assets and funds. Additionally, Stichting Blockrise is not part of the Blockrise organisation, but rather an independent foundation that maintains a contractual agreement with Blockrise Capital B.V.

While Stichting Blockrise and the Blockrise Capital B.V. are operationally linked, Stichting Blockrise is completely legally separated from Blockrise Capital B.V. This legal separation serves to safeguard Investor’s ownership rights over their crypto assets and funds in the event of Blockrise Capital B.V.’s insolvency. Furthermore, the segregating of Investor’s crypto assets and funds from those of the Blockrise serves to limit conflicts of interest that may arise from the control of investor’s crypto assets and funds.