NYDFS updates virtual-currency custody and insolvency guidance

What changed

NYDFS superseded its 2023 custody guidance with more specific requirements for acceptable subcustodians, subcustody agreements, permissible use of customer assets, disclosure, and preservation of customers’ beneficial interests in insolvency.

Who it affects

• New York virtual-currency custodians, subcustodians, investment advisers, funds, and clients

What is still open

• How DFS will apply the updated expectations to individual custody chains and insolvency structures

What it means for an advisor

• Reassess segregation, title, rehypothecation, subcustodian eligibility, contracts, disclosures, books and records, and insolvency opinions.