Ownership of digital assets has grown significantly in recent years. The growth of digital assets, including cryptocurrencies and NFTs, created a new market for financial institutions to operate in. Banks, registered investment advisers (RIAs), and registered investment companies (RICs) launched services to manage customers’ digital assets alongside traditional financial assets. Being a relatively new market, few regulations were in place to oversee the custody of digital assets.
This is all set to change as the SEC and the New York Department of Financial Services passed new, stricter rules regarding the management of digital assets by financial institutions. These new rules, which were issued on September 29, 2025, are set to change how Bronx banks handle customers’ digital assets.
The Growth of Digital Assets
Owning digital assets is a popular investment strategy. People looking to invest in digital assets can buy cryptocurrencies as a hedge against inflation or purchase NFTs to resell at a higher price in the future. A popular digital asset strategy is buying multiple digital assets that can be managed in a single portfolio.
Many customers receive digital assets through tokenized rewards and NFT bonuses. These rewards are usually offered by online crypto casinos as sign-up bonuses or distributed as part of loyalty programs. Customers receiving these types of bonuses and rewards are placing them into their digital asset portfolios to be managed with the rest of their digital assets.
Overview of New Crypto Custody Rules
The new guidance and updates on crypto custody issued by the SEC and NYDFS impose firmer rules for custodians of digital assets, particularly concerning sub-custody arrangements. The SEC has firmly indicated that Registered Advisors and Regulated Funds must use qualified custodians to hold customers’ assets. These new guidelines have been developed to reduce crypto custody risks.
Under the new rules, custodians are required to ensure that customer assets are separated from the custodian’s own. It further states that customers’ digital assets must remain beneficial to the customer in the event of insolvency. In short, customers’ assets must be clearly segregated from the institution’s own assets, and there must be clear records tracing assets to their holders. These new rules also limit the use of customer assets. Custodians must hold customer assets and may not use them for their own purposes, such as loan collateral.
The issuance of these new rules aims to increase the number of institutions offering crypto asset custody services to Registered Advisors and Regulated Funds. Guardrails have been put in place for a regulated operational framework governing the use of sub-custodians. These guardrails ensure that customer interests are protected and reduce the risk of asset shortfalls.
No-Action Relief for State Trust Companies
On September 30, 2025, the SEC sent out a no-action letter stating that RIAs and RICs can treat somе state-chartered trust companies as banks for the custody of digital assets and related cash equivalents. Highlighted in the no-issue document is a list of conditions that a state-chartered trust company must meet to be considered a bank. Among these conditions are:
Authorization by a trust company’s state regulator must be issued for the provision of custody services for digital assets and related cash and cash equivalents.
Written policies and procedures must be in place to protect customers’ digital assets. These policies and procedures must be reviewed by the RIA or Regulated Fund.
The trust company adheres to a formal documented custodia agreement with SEC requirements for safekeeping of digital assets.
New Blockchain Analytics Guidance
In an industry letter issued on September 17, 2025, the NYDFS provided guides for banking organizations on how to use blockchain analytics tools to monitor digital asset transactions. These guidelines included identifying high-risk wallets, tracing flows, and assessing third-party risks.
Blockchain analytics tools are used to monitor digital asset transactions. Effective tools can help identify suspicious transaction activity, trace transactions across the blockchain network, and identify links between blockchain addresses and their owners. Implementing blockchain analysis tools allows institutions to accurately determine the risk levels of transactions.
The letter outlines key guidance points, including wallet screening to identify high-risk clients, verifying that funds come from legitimate service providers, monitoring systems to assess customers’ potential exposure to financial crimes, and evaluating the risks associated with third parties.
How These Rules Affect Bronx Banks
Banks in New York are actively exploring digital asset services as more residents are buying crypto assets. The inclusion of digital asset services represents new revenue opportunities for New York banks and economic benefits for areas such as the Bronx.
If the new rules are implemented effectively, Bronx banks could build long-term relationships with clients by offering trusted crypto capabilities and asset management. The new rules make it easier to operate as crypto custodians, thanks to improved regulatory clarity, and could accelerate the adoption of digital asset services for Bronx banks.
Bronx banks can take advantage of the new rules by partnering with established and compliant custodians. This reduces the need to build in-house infrastructure to meet segregation, sub-custody governance, and audit requirements. This positions banks to adopt digital asset services in cost-effective ways while limiting exposure to risks.
The passing of these new rules by the SEC and NYDFS marks a significant moment for banks offering digital asset services. Banks in the Bronx face both challenges and opportunities amidst these new rules, and as digital assets move firmly into banking ecosystems, they have an opportunity to use the new rules to position themselves as leaders in crypto asset management.
Featured image credit: DepositPhotos.com
