NYDFS Issues Guidance on the Importance of Segregation and Segregated Accounting for Customer Funds in the Crypto Industry
A guidance was issued by the NYDFS on the importance of segregating customer streams and separate accounting in the crypto industry. Following the recent crypto exchange collapse and the indictment or well-known allegations against its co-founders and top representatives, the New York Department of Financial Services issued guidance requiring that customer assets held by virtual currency businesses be segregated. Is it or it needs to be separated. The guidance was provided or issued by the Superintendent of the New York Department of Financial Services, Adrienne Harris, and the regulator emphasizes that virtual currency sun protectors must be kept balanced and in sight to preserve customer safety and trust. There is a strong need to put in place a “safe regulatory framework” to implement. The New York Department of Financial Services provides a summary of four separate policies and standards on guidance that virtual currency entities must adhere to. The four policies include whether the client will seek separate accounting for virtual currency as well as the VCE Custodian’s limited interest in and use of the client virtual currency. Sub-custody arrangements and client disclosures.
The New York regulator details that in order to properly hold customer virtual currency and to maintain and consolidate appropriate books and records, a VCE custodian is expected to keep records of the corporate assets of the VCE Custodian and its associated entities. Keep the Customer Virtual Currency in separate accounts and segregate the same accounts within the Custodian. The regulator further states that the custodian should have a limited interest in the access of customer funds and virtual assets of the customer. Guidance from the New York Department of Financial and Services states that “when a person gives possession of a property to a custodian for the purpose of protecting a client, the department has found that the custodian is limited to performing legacy and security services only.” shall occupy for the purposes”.