NYDFS Updates Crypto Custody Guidance That Could Affect Bitcoin Users Ahead of Adrienne Harris’s Departure

• Separate on‑chain wallets or omnibus wallets with internal ledgers required for customer assets.

• Custodians may not use customer crypto as collateral or company property; acceptable sub‑custodian relationships are defined.

• Update issued by NYDFS ahead of leadership change; clarifies insolvency guardrails and permissible uses of customer assets.

NYDFS crypto guidance updated: new custody, insolvency protections and asset‑use limits—read COINOTAG’s concise analysis and recommended actions.

What is the NYDFS crypto guidance update?

NYDFS crypto guidance is a clarified set of guardrails issued by the New York Department of Financial Services to protect crypto customers in insolvency scenarios. The two‑year update specifies acceptable sub‑custodians, requires separation of customer assets into designated on‑chain wallets, and prohibits custodians from using customer crypto as their own collateral.

How does the update protect users in insolvency?

The guidance requires custodians to record customer balances in internal ledgers tied to separate on‑chain wallets, or to use one or more omnibus on‑chain wallets with clear ledger accounting. This separation reduces commingling risk and improves traceability of assets during insolvency. NYDFS explicitly states custodians must not pledge customer crypto to secure credit, limiting recovery exposure.

Why did the NYDFS issue the update now?

NYDFS issued the update to address evolving sub‑custodial models and increasing use of third‑party custody arrangements in the digital asset sector. The regulator aims to reduce consumer harm by clarifying governance expectations and permissible uses of customer assets as custodial practices diversify.

What changed for custodial practices?

The primary changes require: (1) segregation of customer assets on‑chain or via ledgered omnibus wallets, (2) stricter definitions of acceptable sub‑custodians, and (3) a prohibition on using customer assets to secure company liabilities. These provisions are designed to improve asset recoverability and legal clarity in insolvency proceedings.

Who is affected by the guidance?

The update applies to crypto firms operating in or offering services to New York residents under the NYDFS BitLicense framework. Firms subject to BitLicense must align custody practices and sub‑custodian relationships with the clarified expectations in the guidance.

Who issued the guidance and what leadership changes are relevant?

The update was announced by NYDFS Superintendent Adrienne Harris shortly before she announced her planned departure. Governor Kathy Hochul confirmed Harris will step down on Oct. 18, and Kaitlin Asrow will serve as acting superintendent. These leadership changes may affect the timing and implementation of future regulatory actions.

Frequently Asked Questions

How should customers verify a custodian follows NYDFS guidance?

Customers should review a custodian’s publicly available custody disclosures, ask about on‑chain segregation practices and ledger reconciliation, and confirm whether the firm is licensed under New York’s BitLicense framework. Firms should provide clear policies on sub‑custodians and asset use.

Will the guidance change the BitLicense program?

The update clarifies operational expectations within the existing BitLicense framework rather than creating a new licensing program. NYDFS has emphasized supervision and compliance with custody and insolvency guardrails under current authority.

Key Takeaways

• Clear custody rules: Custodians must separate customer assets into on‑chain wallets or use ledgered omnibus wallets.
• Customer‑asset protections: Customer crypto cannot be used as company collateral or to secure loans.
• Regulatory continuity: NYDFS issued the update amid leadership transition; compliance remains required for BitLicense‑regulated firms.

Conclusion

The NYDFS crypto guidance update tightens custody and insolvency protections to improve recoverability and reduce commingling risk. Firms operating under BitLicense should review custody arrangements and sub‑custodian agreements now. COINOTAG will monitor NYDFS developments and report further guidance or enforcement actions as they occur.

Published: 2025-09-30 | Updated: 2025-09-30 | Author: COINOTAG