Coinmerce B.V. (hereafter “Coinmerce”) is committed to managing conflicts of interest that may arise in the course of providing services to its Clients. This Conflict of Interest Statement is drawn up to provide you with up-to-date information as regards the general nature and sources of Conflicts of Interests that we have identified and steps that we take to mitigate them. In this Conflict of Interest Statement we aim to provide you with a summary of our Conflicts of Interest policy and provide an up to date overview of the the potential and actual Conflicts of Interest we have identified and information in respect thereof which is important for you to take note of in order to be able to make an informed decision if you wish
to (continue to) make use of our Services, such as the situation giving rise to the Conflict of Interest, the nature thereof, the risks that we foresee in relation to such Conflict of Interest and how we (try to) mitigate such Conflict of Interest.
1. Scope of Coinmerce' Conflict of Interest Policy
The Conflicts of Interest Policy applies to all Coinmerce employees, directors, shareholders and any person directly or indirectly linked to Coinmerce or its shareholders by control, such as affiliates and other related parties (“Connected Persons”). It covers conflicts that arise, or could potentially, arise:
Between Coinmerce (and any of its Group companies ) and a Client;
Between a Connected Person and Coinmerce;
Between a Connected Person and a Client; and
Between different (groups of) Clients;
2. Definition of Conflicts of Interest
Conflicts of Interest are situations where competing obligations or incentives may lead Coinmerce or any of its Connected Persons to favour one interest over another. Such situations could result in a risk of harm or disadvantage to a Client, either directly or indirectly. Common examples include:
Coinmerce or any Connected Person stand to gain financially at the expense of a
Client.
Coinmerce or any Connected Person have a vested interest in the outcome of a
Service or Client Order that is different from the Client’s interest in that outcome.
Coinmerce has a financial or other incentive to favour one Client or group of Clients over another.
3. Identification of Conflicts
To effectively manage conflicts, Coinmerce is proactive in identifying potential and actual conflicts of interest that could arise during its Service provision and broader operations. This involves:
Mapping potential conflicts within business processes, employee roles, and Client interactions.
Continuous training for staff on identifying conflicts in their daily activities.
Documentation of conflicts that have arisen or may arise, ensuring transparency
and enabling systematic monitoring and review.
4. Preventive Measures
Coinmerce enforces several preventive measures to minimise the occurrence of
conflicts:
Segregation of Duties: Coinmerce enforces separation between departments and functions with potentially competing interests. Employees involved in different activities have appropriate independence to prevent conflicts.
Confidentiality and Information Barriers: Sensitive information is accessible only
to relevant employees, and information-sharing between departments is restricted to prevent conflicts arising from information asymmetry.
Gifts and Inducements: Coinmerce enforces a gifts and inducements policy.
Employees and directors are required to log any received gifts or inducements,
ensuring they do not influence business decisions.
Personal Transactions: A personal transactions policy restricts employees from
engaging in transactions that could conflict with Client interests or Coinmerce'
activities. Employees must disclose relevant transactions as per internal procedures.
Employee Conduct and Ethics Standards: Employees and directors are required
to adhere to strict ethical standards, acting honestly, fairly, and in the best interests of Clients.
5. Managing Conflicts of Interest
Where conflicts of interest cannot be prevented, Coinmerce has established measures to manage and mitigate them:
Disclosure to Clients: In cases where a conflict may affect a Client’s interests,
Coinmerce will disclose the conflict in clear and understandable terms before
proceeding with the relevant Service or business activity. This disclosure allows
Clients to make informed decisions regarding their interactions with Coinmerce.
Monitoring of Transactions and Business Relationships: Coinmerce monitors all
transactions and relationships with third parties that could potentially create a conflict. This monitoring includes reviewing remuneration arrangements, commission structures and other forms of inducement.
Enhanced Review for High-Risk Situations: Some conflicts, such as those
involving inducements or potential Client favouritism, undergo enhanced scrutiny to ensure that mitigation measures are sufficient and effective.
Whistleblowing Policy: Coinmerce maintains a whistleblowing procedure to enable anyone, including employees, to confidentially report any conflicts or breaches of this policy without fear of retaliation.
6. Disclosure of Conflicts
If Coinmerce determines that a conflict of interest cannot be prevented, it will inform the affected Client(s). This disclosure includes:
A clear description of the nature of the conflict.
The potential impact on the Client’s interests.
The measures taken by Coinmerce to mitigate the conflict.
Conflict Disclosures
Conflict of interest situations in connection with Coinmerce operating as a member of a group Coinmerce is part of a corporate group.
As a result of the structure of the group, a potential conflict of interest could arise, because of the services provided by these entities in relation to crypto-assets. Conflicts of interests are primarily driven by the complex interrelationships and overlapping business activities within the group, which may lead to biased decision-making and/or preferential treatment of group entities. Such conflicts may lead to recommendations or decisions that prioritise the interests of related entities within the group over the best interests of clients. This could result in less favorable outcomes for the client, such as suboptimal pricing, higher costs, or limited access to alternative products and services.
Moreover, part of the members of the board of directors of Coinmerce, are also members of the board of directors of the other entities within the group, whilst a part of the indirect shareholders that have a majority interest in Coinmerce also have an interest in other group entities.
Coinmerce acknowledges the importance of an adequate and transparent disclosure
towards its clients and would like to inform its clients in the same transparent manner about the mitigating measures that have been implemented to mitigate the inherent conflicts of interest. These conflicts have been mitigated via (a.o.) the joint authorisation of members of the board of directors, the unanimous decision-making for important strategic decisions, the monthly assessment of (potential) conflicts of interest by the board of advice, the strict handling of conflicts of interest situations in the decision-making process and the annual validation of a third party on adherence to the applicable policies and procedures to manage and monitor conflicts of interest.
Conflict of interest situations in connection with Coinmerce acting as the
counterparty to client trades.
This potential conflict of interest arises from the fact that clients are trading directly against Coinmerce, which acts as the counterparty in these transactions. In such situations, Coinmerce is not only facilitating the trades but also (automatically is) taking an opposing position to its clients for a certain time by holding or acquiring crypto assets for its own account until it rebalances its inventory positions. Although this is within the nature of the exchange service, it might create a conflict where Coinmerce may have financial incentives that could influence its behavior in a manner that is not aligned with the best interests of the client.
Furthermore, Coinmerce uses a pricing engine that relies on prevailing market data to
generate (according to the applied pricing methodology) a fair price for quotes provided to its clients. As Coinmerce controls the pricing model and functioning of the Pricing Engine, a conflict of interest could arise, as Coinmerce could manipulate the pricing engine to skew or alter prices in its favour, or it could prioritise sources of data that benefit its own positions. To manage this potential conflict of interest, Coinmerce maintains a pricing, costs and fees policy and has published the pricing methodology which determines the pricing for exchanges with clients in an automated manner, ensuring clients are offered a fair price when dealing with Coinmerce.
Conflict of interest situation in relation to crypto asset offerings and trading
incentives.
This potential conflict of interest arises between the client and Coinmerce in relation to trading incentives provided to Coinmerce. Specifically, Coinmerce benefits from the volume and/or frequency of trades of its clients. Therefore Coinmerce might be incentivised to offer crypto-assets that are very volatile or otherwise trending (such as popular or “hyped” memecoins) and prioritise its own financial gain over a strict asset selection. It however must be highlighted that Coinmerce only enables the exchange of crypto-assets, and in no case provides advice to or takes investment decisions for its clients. The final decision to trade therefore always lies with the client, which significantly reduces this conflict.
Furthermore, potential conflicts of interest in this domain can arise between the client and Coinmerce in relation to all forms of financial incentives that Coinmerce may receive from third parties. Specifically, in case Coinmerce would receive payments, cost sharings, rebates, or other financial benefits from third-party service providers, partners, or affiliates as compensation for offering services for a specific crypto-asset to its clients. Coinmerce however maintains a strict no-remuneration policy regarding the selection process of crypto-assets for its service provision.
Conflict of interest situations in connection with yield services
Coinmerce' yield services, facilitated by Coinmerce Earn, involve the staking and on-lending of borrowed client crypto-assets to third parties, including an intra-group entity, with proceeds shared between both Coinmerce and Coinmerce Earn. This structure presents several potential conflicts of interest. Firstly, there's a risk that Coinmerce (Earn) may prioritise maximising returns, potentially leading to riskier staking or on-lending activities.
Secondly, clients face counterparty risk with Coinmerce Earn, which, while part of the same group, is not a MiCAR-regulated CASP as the lending and borrowing of crypto-assets is currently not regulated under MiCAR. Thirdly, the on-lending of assets to an intra-group entity, which can utilise these assets for proprietary trading strategies, creates a risk that the borrowing rate paid by the intra-group entity may not reflect a fully arm’s length market rate, potentially impacting the yield returned to clients. Finally, Coinmerce Earn might allocate a larger portion of borrowed assets to this intra-group entity in pursuit of higher group returns, potentially exposing clients to undisclosed higher risks. Clients should be aware that these conflicts could impact the management and security of their crypto-assets within the yield services.
To mitigate these potential conflicts, Coinmerce has implemented several key measures. Coinmerce Earn operates under a risk management framework, outlining clear limits and management procedures for staking and on-lending activities to safeguard borrowed assets, including strict maximum allocations to third-party borrowers. Internal controls, implemented through a Service Level Agreement, ensure that Coinmerce Earn operations are aligned with Coinmerce' standards, despite not being directly regulated under MiCAR. Finally, independent internal monitoring and oversight mechanisms are in place to ensure that Coinmerce Earn’s activities remain consistent with agreed-upon risk management policies
and client interests.
Conflict of interest situations in connection with custody services
Coinmerce provides custody services for client crypto-assets, which introduces potential conflicts of interest. Firstly, there's a potential risk of commingling client assets with Coinmerce' proprietary assets or using client assets for proprietary activities, such as lending or trading, without explicit client consent. This could expose clients to increased risks and complicate asset recovery in the event of insolvency or operational issues.
Secondly, Coinmerce' discretion over custody solution expenditures presents a risk that cost-saving measures may be prioritised over investing in secure, high-quality infrastructure, potentially compromising asset security to the detriment of the client.
To mitigate these risks, Coinmerce implements several key measures. Strict asset
segregation is in place to ensure client assets are held separately from Coinmerce'
proprietary assets in dedicated foundation wallets. Client assets are not used for lending, collateralization, or other purposes without explicit client agreement. Regular internal and external audits are conducted to verify asset segregation and prevent commingling or misuse. Coinmerce commits to using market-leading, institutional-grade custody and wallet infrastructure software to ensure client asset safety. Independent auditors regularly assess and certify the security of the wallet infrastructure.