New York Orders Crypto Funds To Separate Customer Assets From Their Own - State Regulators

Financial regulators in New York state have told crypto funds to separate customers' assets from their own to prevent the kind of commingling that allegedly led to the collapse of virtual currency exchange operator FTX, a statement said Monday

NEW YORK (UrduPoint News / Sputnik - 23rd January, 2023) Financial regulators in New York state have told crypto funds to separate customers' assets from their own to prevent the kind of commingling that allegedly led to the collapse of virtual currency exchange operator FTX, a statement said Monday.

The New York State Department of Financial Services said cryptocurrency operators should always protect customer assets, maintain comprehensive books and records and properly disclose material terms and conditions associated with their products and services, including custody services, without making false, misleading or deceptive representations or omissions.

"To custody customer virtual currency properly and maintain appropriate books and records, a VCE Custodian (a Virtual Currency Entity that acts as a Custodian) is expected to separately account for and segregate customer virtual currency from the corporate assets of the VCE Custodian and its affiliated entities, both on-chain and on the VCE Custodian's internal ledger accounts," the department added in the statement.

US financial authorities, including the Securities and Exchange Commission that regulates the country's stock exchange, have come down hard on the crypto industry after the FTX collapse in November. Prosecutors in Manhattan have since charged the exchange's founder Sam Bankman-Fried of stealing billions of Dollars in customer funds to plug losses at his hedge fund, Alameda Research, which acted as a backstop financier for the crypto exchange. Bankman-Fried has denied any criminal wrongdoing.

The FTX saga foresaw the meltdown of the crypto market, wiping out a collective $1.3 trillion from digital tokens, including the famous Bitcoin. The FTX collapse has also led to bankruptcy filings by other branded Names in crypto such as the Celsius Network and the lending unit of Genesis Global Capital.

Financial regulators, including those in New York state, have issued multiple guidance to crypto investors and operators in recent months to prevent more debacles within the industry.