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 (NYDFS) 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. FTX Collapse Prompts NYDFS to Issue Guidance on Virtual Currency Custodian Regulations
Following the recent collapse of FTX and allegations directed at its co-founder, Sam Bankman-Fried, and top deputies, the New York Department of Financial Services (NYDFS) released guidance detailing that customer assets held by a virtual currency business must be segregated.
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 (VCEs) should adhere to. The four policies are as follows: Segregation of and Separate Accounting for Customer Virtual Currency; VCE Custodian’s Limited Interest in and Use of Customer Virtual Currency; Sub-Custody Arrangements; and Customer Disclosure.
“To custody customer virtual currency properly and maintain appropriate books and records, a VCE custodian is expected to separately account for and segregate customer virtual currency from the corporate assets of the VCE custodian and its affiliated entities, both onchain and on the VCE custodian’s internal ledger accounts,” the New York regulator details.
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. Tags in this story accounting, Affiliated entities, Allegations, Businesses, code of conduct, collapse, Commingle, Compliance, Corporate assets, crypto firm, Custodial structures, customer assets, Customer disclosure, Customer Funds, customer protection, Expectations, financial regulator, ftx, Governance, Guidance, guidelines, Insolvency, Internal ledger accounts, jurisdiction, legal framework, Limited interest, New York regulator, NYDFS, Onchain, Oversight, policy, Regulations, restrictions, Safekeeping, Sam Bankman-Fried, sbf, Segregated, Standards, Statutes, Sub-custody arrangements, supervision, VCE custodian, virtual assets, Virtual Currency
What are your thoughts on the NYDFS’s guidance on custodial structures for customer protection in the event of a crypto firm’s insolvency? Share your thoughts about this subject in the comments section below. Jamie Redman
Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today. US Authorities Charge Mango Markets Attacker — Defendant Arrested, Detained in Puerto Rico REGULATION | 23 hours ago Jim Cramer Thanks SEC Chairman for Standing up to "Crypto Bullies" Seeking Spot Bitcoin ETF Approval REGULATION | 2 days ago
Image Credits: Shutterstock, Pixabay, Wiki Commons Previous articleEthereum Developers Commence Finalizing Shanghai Upgrade ‘Shadow Fork’ for Testing and Bug Identification Next articleSpace Odyssey Loyalty Program by BitSpinCasino Dishes Out up to 15% Weekly Cashback & 300 Free Spins Show comments More Popular NewsIn Case You Missed ItDraft Law Regulating Aspects of Crypto Taxation Submitted to Russian Parliament
A bill updating Russia’s tax law to incorporate provisions pertaining to cryptocurrencies has been filed with the State Duma, the lower house of parliament. The legislation is tailored to regulate the taxation of sales and profits in the country’s market ... read more.NFT Sales Volume Saw a Small Uptick This Week — Moonbirds, Mutant Apes Take Top Sales Goldman Predicts US Recession Odds at 35% in 2 Years, John Mauldin Wouldn"t Be Surprised if Stocks Fell 40% Interest in Real Estate Investments in Spain Grew 400%, With Some Using Crypto and Stocks as Payment Method Iran to Increase Penalties for Unauthorized Cryptocurrency Mining