NYDFS Issues Guidance on Virtual Currency Custodial Structures

Guidance Provides Expectations With Respect to Digital Asset Custody Practices by New York-Regulated Entities Sullivan & Cromwell LLP - January 25, 2023
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In the wake of bankruptcy filings by several prominent digital asset firms, the New York Department of Financial Services released guidance regarding digital asset custody practices. The guidance provides that a “virtual currency entity custodian” must: (1) separately account for and segregate customer assets from proprietary assets, (2) take possession of customer assets only for the limited purpose of carrying out custody and safekeeping services, (3) request approval before implementing any sub-custody arrangements, and (4) provide adequate disclosure to customers.
 
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