# Risks

### **Main Risk Factors relating to Tokens, their Market Valuation and their Availability**

#### **Risk of changes in Spanish or European legislation.**&#x20;

Tokens will be issued in accordance with Spanish law in effect as of the date of this Whitepaper. There can be no assurance as to the impact of any possible court decisions or any possible changes in Spanish law or administrative practices after the date of this Whitepaper, and any such changes may significantly impair the price or usability of the tokens affected by such circumstances.

Notwithstanding the above, it is necessary to point out that, as of the date of this Whitepaper, despite the fact that both the CNMV and the various European regulatory bodies have issued various opinions and/or recommendations regarding the legal concept of tokens, as well as the potential regulation of tokens and Initial Coin Offerings, there is no national regulation or specific and harmonized regulatory framework at the European level on tokens, their different types, or Initial Coin Offerings.

From the point of view of the main legal risks in relation to Tokens and ICO, some of the warnings or recommendations made by different regulatory and/or supervisory entities in this regard are briefly summarized below:

* **CNMV press release: ESMA warns of the risks of so-called "ICOs" ("Initial Coin Offerings") (February 8, 2018).**
*
  * The European Securities and Markets Authority (ESMA) issued two statements on Initial Coin Offerings, including risks for investors and recommendations and rules for entities considering participating in them, such as:
    * "ESMA warns investors of the high risk of losing the capital invested in these types of offerings, as they are generally highly speculative and high-risk investments."
    * "The price of the coin or token could be very volatile and investors may not have the ability to recoup their investment over an extended period."
  * Link to complete viewing:

[https://www.cnmv.es/portal/verDoc.axd?t={d1d37c47-84fd-4a9b-8251-3186085e0c86}](https://www.cnmv.es/portal/verDoc.axd?t=%257bd1d37c47-84fd-4a9b-8251-3186085e0c86%257d)

**● Joint communiqué of the CNMV and the Bank of Spain on "cryptocurrencies" and "initial coin offerings" (ICOs) (February 8, 2018).**

* Cryptocurrencies" are not backed by a central bank or other public authorities, although they are sometimes presented as an alternative to legal tender, although they have very different characteristics.
* "The CNMV and the Bank of Spain warn that, to date, no "cryptocurrency" issuance nor any ICO has been registered, authorized or verified by any supervisory body in Spain. This implies that there are no "cryptocurrencies" or "tokens" issued in ICOs whose acquisition or holding in Spain may benefit from any of the guarantees or protections provided for in the regulations relating to banking or investment products."
* "There is a high risk of loss or fraud in this type of investment."
* "Either because of how they are structured or because of where the residence of their issuers is located, tokens issued in an ICO or financial products referenced to "cryptocurrencies" might not be subject to regulation. Therefore, buyers or investors would lack the protections offered by Spanish and, in general, European Union legislation to regulated investments."
* "Cryptocurrencies lack intrinsic value, making them highly speculative investments. Likewise, their strong dependence on unconsolidated technologies does not exclude the possibility of operational failures and cyber threats that could mean temporary unavailability or, in extreme cases, total loss of the amounts invested."
* "For the most part, ICOs are associated with entrepreneurial projects in very early stages of development, without a consolidated business model or with uncertain cash flows. These initiatives may have a high probability of failure.".
* "The absence of markets comparable to organized securities markets subject to regulation may make it difficult to sell "cryptocurrencies" or "tokens" issued in ICOs for conventional cash."
* Link to complete viewing:&#x20;

[https://www.bde.es/f/webbde/GAP/Secciones/SalaPrensa/NotasInformativas/18/presbe2018\_07.pdf](https://www.bde.es/f/webbde/GAP/Secciones/SalaPren)

* **CNMV considerations on "cryptocurrencies" and "ICOs" addressed to financial sector professionals (February 8, 2018).**
  * "The CNMV considers that a good part of the operations articulated as ICOs should be treated as issues or public offerings of negotiable securities.""In the case of ICOs that, based on criteria such as those just mentioned, may be considered negotiable securities or financial instruments, it is recalled that the corresponding national or European rules will be applicable to them, fundamentally those contained in, related to or derived from MiFID II, the Prospectus Directive and the Directive on Alternative Investment Fund Managers."
* Link to complete viewing:&#x20;

[https://www.cnmv.es/portal/verDoc.axd?t={9c76eef8-839a-4c19-937f-cfde6443e4bc}](https://www.cnmv.es/portal/verDoc.axd?t=%257b9c76eef8-839a-4c19-937f-cfde6443e4bc%257d)

For the above purposes, the following distinction has been doctrinally established:

* We would speak of a utility token when we are in the presence of tokens that allow digital access to applications or services supported by a structure based on Blockchain technology. In principle, the utility token does not attribute rights or expectations of participation in a potential revaluation or profitability of businesses and/or projects, nor political or economic rights (in the sense of distribution of dividends, for example) in relation to the company issuing the token.&#x20;
* A security token, on the other hand, is a token that represents rights with economic content that, due to their legal configuration and transmission regime, are susceptible to generalized and impersonal traffic in a financial market. This occurs, for example, normally in projects or businesses for which security tokens are issued as a financing mechanism (called ICOs, STOs or IEOs). A security token thus attributes or can attribute rights or expectations of participation in a potential revaluation or profitability of businesses and/or projects, assuming that investors acquire it for this purpose.&#x20;

Therefore, it is considered that Security Tokens present or grant rights that can be considered equivalent to shares, debentures and other financial instruments included in article 2 of the TRLMV; being therefore considered by the regulator as negotiable securities, and as such, fully subject to the regulatory legislation of the securities markets. This determines that although there is no specific regulation in our country on Cryptoassets similar to securities or securities, it is generally accepted that those Cryptoassets comparable to negotiable securities must comply, like any other security, with the regulations applicable to them and, therefore, business or financial activities dealing with this type of assets will be fully valid and legal as long as they comply with the aforementioned regulations.

Analysing the characteristics of the VENT Token, we can conclude that:&#x20;

* The token received by the user does not represent an asset of value of the company.&#x20;
* The token received by the user is not associated with the shareholding and the final value of the company, nor is its sale or acquisition linked to a possible revaluation of the price.&#x20;

Therefore, we can conclude that VENT Token is a utility token, according to Spanish legislation and CNMV criteria.&#x20;

Furthermore, **"MiCA"** (proposal for a Regulation of the European Parliament and of the Council on cryptoasset markets, amending Directive (EU) 2019/1937, currently pending approval) expressly recognizes that Cryptoassets are digital representations of value or rights with the potential to bring significant benefits to consumers and market participants.&#x20;

It also expressly recognizes that there is a varied typology of Cryptoassets; some of them can be assimilated to financial instruments and, therefore, included in the scope of application of the rules on securities markets or to electronic money and, therefore, included in the scope of application of the Community rules on electronic money.&#x20;

These two types of digital assets would be excluded from the scope and object of MiCA once this regulation is approved.&#x20;

However, MiCA recognizes the existence of other types of digital assets that are precisely those that this Regulation intends to regulate. Particularly, MiCA refers to: (i) cryptotokens or digital assets that have a payment functionality and are intended to serve as a means of payment to acquire goods and services and as a store of value, and; (ii) utility tokens whose main functionality is to give their holders digital access to an application, services or resources available and offered in a DLT and whose issuers only issue and accept them precisely to enable the use of such services, applications or resources. This is the definition of utility token that is precisely stated in Article 3.1 (g) of MiCA. &#x20;

If we take into account the characteristics of the VENT Token by virtue of the information provided by the Client, **we can conclude that the definition of utility token established by MiCA corresponds to the characteristics of the VENT Token**. Therefore, in our opinion, the VENT Token can qualify as a utility token for the purposes of the definition that currently exists in the draft as far as we are aware of MiCA.&#x20;

Notwithstanding the foregoing, the Client must take into account the final wording and entry into force of MiCA, since this new EU Regulation imposes legal obligations on those companies whose activities are related to the issuance, trading and custody of utility tokens and establishes a complete regulation of this type of tokens in the European legal framework.

By virtue of the foregoing, investors should be aware that at the time of the issuance of the Tokens, the legal nature of the rights derived from the Tokens cannot be guaranteed, as well as the rights that may arise from the Tokens for the investors after the ICO.

In other words, the investment in Tokens derived from the ICO envisaged by VENT is subject to the risk inherent to the impact that may be caused by any judicial resolution, regulatory change or new regulation that, both at national and European level, occurs after the date of this Whitepaper, in relation to the Tokens or the ICO.&#x20;

In conclusion, the investor in ICO Tokens should be aware that any of the above regulatory, administrative or legal changes could significantly impair the price, rights derived from, or ability to use the Tokens.

### **Risk related to withholding tax liability as a result of noncompliance with reporting procedures**

The procedure described in this Base Prospectus for the provision of the information required by Spanish laws and regulations is a summary and the Issuer assumes no responsibility for them. In the event that the procedures currently applicable are modified or supplemented by, among others, any Spanish law, or by any interpretation or ruling of the Spanish tax authorities, the Issuer will notify the holders of the Tokens of such reporting procedures and their implications, as the Issuer may be obliged to apply withholding tax on distributions in respect of the securities in question if the holders do not comply with such reporting procedures.&#x20;

The investor is also aware of the following risks that may occur:&#x20;

* Risk of loss of usability of tokens on the blockchain platform where they are hosted due to problems in the platform.
* Risk of illiquidity and lack of representation in the market.
* Risk of abrupt change in token valuation due to changes in the market.&#x20;
* Risk of abrupt change in token valuation due to token unlocking.
* Risk of unknown errors in blockchain technology&#x20;
* Risk of loss of tokens by the token owner or a third party&#x20;
* Risk of loss of tokens or cryptocurrencies by VENT.

#### **Audits**

Several security audits will be carried out by external companies.

The audits will be performed on the token smart contract and on the additional smart contracts that the platform develops, testing all contracts under all circumstances on the testnet before uploading them to the mainnet.&#x20;

The entire platform will also be audited in due time with special attention to the token input/output module.

#### **Legal**

VENT FINANCE is a company officially settled up in Spain in 1st of July, 2021.&#x20;

**Cristina Carrascosa Cobos**, an experienced blockchain lawyer, represents VENT as legal and tax advisor.&#x20;

The entire process of financing through ICO, issuance of the token and creation of the platform will be sponsored by a team of lawyers from **ATH21**, a law firm specializing in crypto-assets, blockchain and new technologies.

Both Pre ICO and ICO will be fully regulated within the current regulations in Spain and legal guarantees will be offered to the investor, for which each investor must be identified through a KYC system contracted with an external company. Although the token will be regulated as a utility token, and always seeking maximum legal security, many of the requirements of the Securities Market Law for security tokens will be complied with, since legally it has been intended to maintain a conservative and demanding position, thus guaranteeing transparency for investors.&#x20;
