NY DFS Releases Custodial Guidance On Crypto Insolvency

On January 23, the NY DFS released updated guidance with regard to better protecting consumers in the event of virtual currency insolvency. This updated guidance applies to entities that DFS has licensed or chartered to hold or maintain virtual currency assets on behalf of their customers. The guidance reiterates that as custodians, such entities must have practices in place to maintain custody and control of virtual currency similar to that of traditional financial service providers. DFS' previous guidance already required certain practices, such as maintaining books and records, disclosure of certain terms, and protections in place for the assets held. The new guidance sets forth additional requirements and most pertinently, custodians must: