Damex Digital Ltd — MiCA Regulated

Conflict of Interest Disclosure

1. Introduction

This Conflicts of Interest Disclosure (the 'Disclosure') is published by Damex Digital Ltd (the 'Company'), a company incorporated in Malta and authorised as a Crypto-Asset Service Provider ('CASP') by the Malta Financial Services Authority ('MFSA').

This Disclosure is issued in compliance with Article 72 of the Markets in Crypto-Assets Regulation (EU) 2023/1114 ('MiCA') and the associated Regulatory Technical Standards (RTS). Its purpose is to inform clients about the general nature and sources of conflicts of interest that may arise, the risks such conflicts may pose, and the steps taken to mitigate them.

The Company is committed to acting honestly, fairly, and professionally in the best interests of its clients at all times. Where conflicts cannot be entirely avoided, they are managed through robust internal controls and transparency.

2. What is a Conflict of Interest?

A conflict of interest arises where the interests of the Company, its employees, shareholders, or group entities diverge from those of its clients. This includes situations where the Company may make a financial gain or avoid a financial loss at the expense of a client.

Conflicts may arise between:

  • The Company and a Client
  • An employee of the Company and a Client
  • Two or more Clients of the Company
  • The Company and its third-party service providers or group entities

3. Our Business Model and Potential Conflicts

Unlike a multilateral trading venue where clients trade directly against one another, Damex Digital Ltd primarily operates as a dealer and custodian. This means the Company may act as the counterparty to client trades. The following outlines key conflicts inherent to this model and the mitigation measures in place.

3.1 Acting as Counterparty (Principal Trading)

The Conflict. When a client buys crypto-assets from the Company, the Company is the seller; when a client sells, the Company is the buyer. Trades may be executed on a matched principal basis or by dealing on own account, creating a potential conflict where client pricing could impact Company profit.

Our Mitigation

  • Best Execution: Prices are benchmarked against independent market data and multiple liquidity providers.
  • Transparency: Pricing, spreads, and fees are disclosed prior to trade execution.
  • Matched Principal Trading: For most trades, the Company does not assume market risk.

3.2 Pricing & Spreads

The Conflict. Revenue is generated through spreads or transaction fees, which may present conflicts if pricing is not transparent.

Our Mitigation

  • Disclosure: Pricing methodologies are disclosed in the Terms of Business and Damex Direct portal.
  • Monitoring: Pricing feeds are regularly reviewed by Finance and Compliance teams.

3.3 Group Synergies & Affiliate Dealings

The Conflict. The Company relies on affiliated entities, including Digital Asset Management Ltd (Gibraltar), for IT and operational services. Conflicts may arise if such arrangements are not conducted at arm's length.

Our Mitigation

  • Service Level Agreements: All services are governed by formal SLAs.
  • Regulatory Oversight: The Board retains full responsibility for outsourced functions.

3.4 Custody of Assets

The Conflict. As custodian, conflicts could arise if client assets were used improperly or not adequately segregated.

Our Mitigation

  • Segregation: Client assets are legally and operationally segregated.
  • Bankruptcy Remote: Assets are held in segregated wallets protected from creditor claims.
  • No Re-hypothecation: Client assets are never used without explicit consent.

3.5 Employee Personal Trading

The Conflict. Employees may trade crypto-assets privately, creating potential conflicts such as front-running.

Our Mitigation

  • Personal Account Dealing Policy: All employees are subject to strict trading rules.
  • Prohibitions: Use of inside information is strictly forbidden.
  • Monitoring: Trading activity is monitored by Compliance.

4. Managing and Reporting Conflicts

The Company applies a Three Lines of Defence model:

  • Operational Controls: Business units manage conflicts at operational level.
  • Compliance & Risk: Independent oversight ensures policy adherence.
  • Governance: The Board of Directors oversees the framework.

Disclosure: Where conflicts cannot be adequately mitigated, the Company will disclose their nature and source to clients before conducting the relevant business.

5. Contact

For questions or to report a potential conflict of interest, please contact the Compliance Department at compliance@damex.io.