NYDFS Custody Guidance: New Rules to Protect Bitcoin Ownership in Bankruptcy

The New York State Department of Financial Services (NYDFS) issued guidance directing licensed crypto custodians to construct custody arrangements that preserve actual ownership of digital assets for the customer, including in the event of bankruptcy. The document stresses robust segregation, contractual clarity and operational controls to uphold customer rights and strengthen standards for crypto custody and insolvency priority.

The guidance also establishes guardrails for sub-custodian relationships, prohibiting allocation practices that could impair customer assets or their priority on insolvency. Firms are required to provide clear, prominent disclosures of third-party arrangements and ensure beneficial rights are explicit and enforceable to mitigate asset shortfall risk across the custody lifecycle.