A crypto custodian’s trust-company charter is a starting point for due diligence, not proof that your assets are fully backed, separately owned, insured, or guaranteed to be returned. Evaluate the specific legal entity and account arrangement: where assets are held, how your balance is recorded, what the contract says about ownership and use, and what protections apply if the custodian or a sub-custodian fails.
1. Identify the entity that will actually hold your assets
Start with the exact legal names of the entity you contract with and the entity that controls or holds the assets. Record its jurisdiction, regulator, charter or license, and the activities it is authorized to conduct. A brand may offer services through multiple affiliates, so a parent company’s status does not establish the status of the entity in your agreement.
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Check the relevant regulator’s current records and confirm that the authorization covers the service you plan to use. New York DFS guidance dated September 30, 2025, addresses New York BitLicensees and limited-purpose trust companies that custody virtual currency. It says applicable Part 200 requirements include protecting customer assets, keeping books and records, and disclosing material service terms. The guidance is specific to its regulatory scope, not a universal standard for every custodian. Read the NYDFS custody guidance.
For banks, an OCC bulletin dated July 14, 2025, summarizes an interagency statement that banks providing crypto-asset safekeeping must do so safely and soundly and comply with applicable law. The agencies describe existing risk-management principles and say the statement creates no new supervisory expectations. A bank’s involvement does not, by itself, mean a crypto arrangement is a bank deposit or carries deposit insurance. Read the OCC bulletin.
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2. Trace the custody structure and customer records
Ask for a plain-language map showing which entities stand between you and the assets, including any sub-custodians. Then establish how the on-chain holdings relate to your account balance. “Segregated” can refer to separate wallet addresses, separate accounting entries, legal title, or some combination; ask which protections the provider means.
- Are customer assets held in individual wallets or an omnibus wallet?
- If assets are pooled on-chain, does the wallet contain customer assets only, or are corporate assets included?
- How does the internal ledger assign each customer’s beneficial interest, and how current is that record?
- Can the custodian reconcile customer-level books with on-chain activity, and how are discrepancies investigated and resolved?
- Which entity controls the keys, processes instructions, and is responsible for records and claims?
For entities within its scope, NYDFS expects customer virtual currency to be accounted for separately and segregated from corporate assets both on-chain and in internal records. It recognizes separate customer wallets and customer-only omnibus wallets, while expecting a clear, current audit trail of each customer’s beneficial interest and reconciliation with on-chain activity. An omnibus wallet is therefore not automatically the same as mixing customer property with company property; the records and legal arrangement matter. See the NYDFS expectations.
A 2026 SEC-filed trust prospectus illustrates why the details matter: it describes Fidelity crypto custody using an omnibus wallet alongside other Fidelity customers’ assets, while the trust’s ownership was recorded and segregated in Fidelity’s books and records. That is an example of one structure, not evidence that all Fidelity accounts or custodians use the same arrangement. Review the SEC-filed prospectus.
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3. Test what “reserves” evidence actually establishes
Do not treat a wallet balance or a reserves label as a complete answer to whether customer claims are protected. Ask the provider to specify the legal entity, assets, liabilities, customer balances, wallet addresses, measurement date, and independent assurance provider covered by each report or attestation.
- Does the evidence cover assets only, or also customer liabilities and the way balances are attributed to customers?
- Is it a point-in-time view or does it describe controls and records over a period?
- Can you independently verify the relevant on-chain holdings?
- What reconciliation controls exist, who reviews exceptions, and how are customer records updated?
- Does the report address whether assets are encumbered and whether customers have legal rights to them?
The official materials cited here do not establish a universal proof-of-reserves standard or a reserve ratio that is sufficient for every custodian. A demonstration of assets at particular addresses does not by itself show that all customer claims are fully backed, correctly attributed, unencumbered, or legally recoverable. Describe a specific report by its scope and limitations rather than treating “proof of reserves” as a guarantee. NYDFS custody guidance and the SEC-filed prospectus illustrate the importance of records and account structure.
4. Read the agreement for ownership, asset use, and recourse
Find the provisions governing the relationship and what happens if the provider fails. Look for language on beneficial ownership, permitted instructions, lending or other use of assets, fees, liens, set-off, liability limits, governing law, dispute forum, insolvency, termination, and withdrawal. If a clause is unclear, ask the provider to explain it in writing; marketing descriptions are not a substitute for the contract.
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For covered New York virtual-currency entities, NYDFS expects the written agreement to preserve a custodial relationship rather than create a debtor-creditor relationship. It also expects customer assets to be treated as belonging to customers and not used for the custodian’s own obligations, with clear disclosure of segregation, customer property interests, permitted use, and sub-custody arrangements and risks. These are expectations in the guidance’s stated New York context; do not assume identical rules apply to every provider or jurisdiction. Read the NYDFS guidance.
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5. Examine sub-custody, insurance, and operational exposure
If another entity holds or controls assets, evaluate that link in the chain rather than assuming the primary custodian’s status covers it. Identify each sub-custodian, its jurisdiction and oversight, which assets it holds, how instructions and records flow, and which entity is responsible if access is interrupted. NYDFS guidance says covered custodians should conduct due diligence and obtain approval before establishing a new sub-custody arrangement; it expects agreements to address titling, segregation, and restrictions on using customer assets as collateral. See NYDFS sub-custody expectations.
For any insurance claim, ask for the policyholder, covered events, exclusions, limits, aggregate sharing, claims process, and whether you are an insured or beneficiary. A provider’s corporate policy should not be described as insurance for customers unless the policy terms support that conclusion.
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In a specific 2026 SEC-filed trust prospectus, the crypto assets described were not protected or insured by FDIC or SIPC, and the filing said Fidelity’s insurance was for Fidelity’s benefit and did not guarantee or insure the trust. That is an example-specific disclosure, not a ruling about every policy or account. Read the terms for the exact service you would use. Read the prospectus disclosure.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.6. Check statements and independent review in the right regulatory context
If you hold crypto through an SEC-registered investment adviser, distinguish the adviser’s custody obligations from the direct custody relationship. The SEC investor bulletin describes custody-rule safeguards that include qualified custodians, subject to limited exceptions; written notices about the custodian and account; direct periodic client statements; and annual surprise examinations in applicable cases. It suggests asking whose name is on the account and comparing statements received directly from the custodian with the adviser’s records. These requirements do not automatically apply to every direct crypto custody account. Read the SEC investor bulletin.
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7. Compare providers using the same questions
When comparing actual alternatives, use consistent criteria rather than relying on labels such as “trust,” “institutional,” or “insured.” A comparison should establish what each provider documents, not infer that one is safer based on a single feature.
| Area | What to compare |
|---|---|
| Legal status | Exact contracting and asset-holding entities, charter or license, regulator, jurisdiction, and authorized service. |
| Asset structure | Individual or omnibus wallets; whether wallets are customer-only; customer-level accounting and beneficial-interest records. |
| Reconciliation and assurance | Reconciliation process, audit-trail quality, independent reviewer, evidence scope, measurement date, and stated limitations. |
| Contract and recourse | Ownership language, asset-use restrictions, liens, set-off, permitted instructions, liability provisions, and failure procedures. |
| Sub-custody | Entities and jurisdictions involved, oversight, responsibilities, recordkeeping, and disclosed risks. |
| Insurance | Policyholder, covered losses, exclusions, caps, aggregate exposure, and the customer’s rights to make a claim. |
| Access and exit | Withdrawal process and delays, supported networks and forks, termination terms, and recovery procedures. |
These comparison points reflect the regulatory guidance and example disclosure cited above; they do not establish a ranking of providers. NYDFS guidance, the SEC investor bulletin, and the SEC-filed prospectus address different aspects of custody and should be read within their respective scopes.
What the current rules do—and do not—say
As of October 7, 2026, the SEC lists crypto custody rule S7-2026-35 as a proposal, with comments due December 7, 2026. It is not a final rule. Check the SEC’s page for status updates rather than treating a proposal as an effective requirement. Check the SEC proposal page.
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