Credit & Settlement Risk

Abra Digital Credit & Settlement Risk Notice
Last updated: June 11, 2025

This Credit & Settlement Risk Notice (“Notice”) describes the material risks associated with counterparty credit exposure and the settlement of OTC transactions conducted by Abra Digital (“we,” “us,” or “our”). It applies to all engaging in our stablecoin, cryptocurrency, and fiat liquidity services. By transacting with Abra Digital, you acknowledge that you have read, understood, and accepted these risks.

1. Scope & Overview

Abra Digital facilitates large-ticket OTC conversions, arbitrage executions, and liquidity services across global corridors. These activities inherently expose all to both credit risk (the possibility of counterparty default) and settlement risk (the chance of non- or delayed settlement). Understanding and managing these risks is essential to minimize potential financial loss.

2. Credit Risk

2.1 Counterparty Default

• Description: Even with rigorous due diligence and credit checks, any liquidity partner, exchange, custodian, or banking intermediary may become unable or unwilling to honor its obligations due to insolvency, regulatory action, or operational failures.
• Potential Impact: You may not receive the full amount of stablecoins, cryptocurrency, or fiat you are owed, resulting in unhedged exposures or financial loss.

2.2 Credit Concentration

• Description: Routing large volumes repeatedly through a limited set of counterparties (e.g., particular P2P networks or regional banks) amplifies exposure to a single entity’s creditworthiness.
• Potential Impact: A default by a major partner can disrupt multiple trades, magnifying loss beyond the size of any individual transaction.

2.3 Pre-Funding & Credit Lines

• Description: To expedite settlement, Abra Digital may require pre-funding of stablecoins or fiat, or may extend short-term credit lines.
• Potential Impact: Pre-funded assets become subject to the counterparty’s credit risk until settlement completes. Credit lines, if mismanaged or recalled, can force liquidity shortfalls.

3. Settlement Risk

3.1 Payment System Failures

• Description: Settlement relies on a combination of banking rails (SWIFT, local RTGS) and blockchain networks. System outages, network congestion, or regulatory cut-offs can delay or block fund transfers.
• Potential Impact: Delayed settlement may leave you with unsettled positions, requiring additional capital or collateral to cover interim exposures.

3.2 Operational & Technical Errors

• Description: Mistyped instructions, mismatched account details, or software bugs in integration (FIX, REST, WebSocket) can lead to misrouted payments or failed transactions.
• Potential Impact: Erroneous or failed settlements can result in reconciliation delays, extra banking fees, or unintended asset movements.

3.3 Settlement Finality & Irrevocability

• Description: On-chain transfers achieve finality once confirmed; however, external factors (hard forks, chain reorganizations) can temporarily reverse transactions. Off-chain fiat transfers may also be subject to recall or chargebacks under certain banking rules.
• Potential Impact: Funds believed to be settled may be reversed, requiring re-execution of trades or recuperation of losses.

4. Collateral, Netting & Margin

4.1 Collateral Requirements

• Description: We may request collateral deposits or margin buffers.
• Potential Impact: Collateral held by Abra Digital is subject to our own credit risk and may be used to offset losses in the event of default on either side.

4.2 Netting Arrangements

• Description: Where multiple trades occur with the same counterparty, Abra Digital may net positions to reduce gross exposures.
• Potential Impact: While netting lowers overall credit exposure, simultaneous default by multiple counterparties could eliminate the protective effect of netting.

5. Mitigation Measures

• 1 Diversification of Counterparties: We maintain relationships with multiple liquidity providers, exchanges, and cash agents to avoid concentration risk.
• 2 Credit Limits & Monitoring: We set dynamic credit limits per counterparty and perform continuous monitoring of credit ratings, financial statements, and on-chain indicators.
• 3 Pre-Settlement Checks: All settlement instructions undergo automated validation and dual-control reconciliation before execution.
• 4 Insurance & Recovery: Selected assets are covered by third-party insurance policies; in the event of default, we pursue recovery via contractual claim processes.

6. Responsibilities

• 1 Accurate Instructions: Provide correct account details, wallet addresses, and beneficiary information.
• 2 Sufficient Funding: Ensure adequate balances or approved credit lines to satisfy trade obligations.
• 3 Prompt Reconciliation: Report any discrepancies within 24 hours of notification.
• 4 Regulatory Cooperation: Comply with any lawful requests for information to facilitate settlement or recovery.

7. Acknowledgment & Contact

By using Abra Digital’s services, you confirm that you understand and accept the credit and settlement risks outlined above. For questions or to discuss tailored credit solutions, please contact your Abra Digital relationship manager or email settlement@abradigital.com.