NYDFS Releases Guidance on Importance of Segregation and Separate Accounting for Customer Funds in Crypto Industry
On Monday, the New York Department of Financial Services published guidance on custodial structures to help protect customers’ money if a crypto firm goes bankrupt. New York’s top financial regulator stressed that businesses should not commingle customer funds and that customer funds should be segregated with separate accounting.
The guidance was issued by Adrienne Harris, the superintendent of the NYDFS, and the regulator insists that virtual currency custodians need to apply a “safe regulatory framework” to protect customers and preserve trust. The NYDFS guidance provides a summary of four different policies and standards that virtual currency entities should adhere to.
The regulator further said that custodians should have limited interest in customer funds and in the use of a client’s virtual assets. “When a customer transfers possession of an asset to a VCE custodian for the purposes of safekeeping, the department expects that the VCE custodian will take possession only for the limited purpose of carrying out custody and safekeeping services,” the NYDFS guidance explains.