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SFMA issues guidance on custody risks for crypto-based assets

SFMA has published guidance on custody risks for crypto-based assets and the rules institutions must follow to keep those assets safe.

SFMA has published guidance explaining how it assesses risks linked to the custody of crypto-based assets. The guidance sets out the rules institutions must follow to safeguard those assets.

Interest in crypto-based assets and related services is increasing in the Swiss financial market. More clients want to trade, invest in and securely store cryptocurrencies, and supervised institutions have expanded their services accordingly.

The guidance highlights the specific risks involved in safeguarding crypto-based assets such as Bitcoin or Ether. These risks arise from distributed ledger technology and require specialist expertise and resilient technical infrastructure. If custody is provided abroad, additional legal questions can arise, especially if the custodian becomes insolvent.

Among other safeguards, clients' crypto-based assets must not become part of the custodian's bankruptcy estate. Secure custody therefore requires appropriately supervised providers in Switzerland and abroad, clear bankruptcy-protection rules and continued responsibility by authorised financial institutions when such providers are used.