The New York Department of Financial Services updates the cryptocurrency custody guidelines, emphasizing that customer assets must be isolated from the bankruptcy risk of the custodian

ChainCatcher news, according to FinanceFeeds, the New York State Department of Financial Services (NYDFS) has released updated guidelines for licensed virtual currency custodial entities (VCEs).

The core requirement of the guidelines is that the custodial structure must ensure that the beneficial ownership of digital assets always belongs to the customers, especially in the event that the custodial entity faces bankruptcy, customer assets must also be protected.

NYDFS stated that this update is in response to the surge in demand for virtual asset custody from institutional and retail clients, as well as the increasingly complex "sub-custodial" relationships within the industry. The new guidelines explicitly prohibit custodians from using customer assets for activities such as re-hypothecation or unsecured lending that could harm customer ownership without explicit permission and informed consent.

At the same time, stricter due diligence, contractual terms, and disclosure requirements have been imposed on custodians using sub-custodial institutions. The guidelines aim to provide greater clarity and confidence to customers and encourage licensed entities to review their custodial structures and customer agreements. This updated guideline effective in 2025 replaces the previous version from January 2023.