The Department of Financial Services issued updated guidance on custodial structures for customer protection in the event of insolvency, which supersedes the previous guidance issued on January 23, 2023.
Before
Regulated virtual currency entities were subject to the custodial structure and customer protection requirements outlined in the guidance issued on January 23, 2023.
After
Regulated virtual currency entities must now comply with the updated custodial structure and customer protection requirements outlined in the new guidance issued on September 30, 2025.
Source: NY DFS — BitLicense & Virtual Currency Guidance
View original source →What this means for you
Centralized Exchange
Act nowWhy this matters
The company profile explicitly defines a CEX as an entity that custodies customer funds and is directly responsible for safeguarding those assets. The updated DFS guidance directly targets custodial structures and customer protection in insolvency, requiring immediate operational and legal compliance.
What to do
Review the September 30, 2025 DFS guidance and update internal custodial arrangements and insolvency protection policies to ensure full compliance.
Deadline: Sep 30, 2025
DeFi Protocol
Doesn't applyWhy this matters
The company profile defines a fully decentralized protocol with no identifiable operator, owner, or controlling party, and explicitly notes that nobody at the protocol custodies user assets. Because the regulatory change applies strictly to regulated virtual currency entities with custodial obligations, it does not attach to this entity.
Custodian
Act nowWhy this matters
The company's core business is holding crypto-assets on behalf of clients, making updated guidance on custodial structures and insolvency protection directly applicable to its primary operations. Failure to comply with these newly tightened requirements exposes the entity to immediate regulatory enforcement and operational risk.
What to do
Review the updated September 30, 2025 guidance immediately to audit current asset segregation, cold-storage, and insolvency protection practices against the new standards.
Deadline: Sep 30, 2025