Swiss Financial Market Supervisory Authority issues guidance on safeguarding and insolvency risks in custody of crypto-based assets

The Swiss Financial Market Supervisory Authority (FINMA) has published new guidance explaining how it assesses the risks associated with the custody of crypto-based assets and setting out the rules supervised institutions must follow to keep such assets safe. The guidance responds to growing customer demand in Switzerland to trade, invest in and securely store cryptocurrencies, leading FINMA-supervised firms to expand related services. FINMA highlights technology-driven risks linked to distributed ledger arrangements, which require specialist expertise and robust technical infrastructure to mitigate. Where custody is performed abroad, the guidance flags additional legal complexity, particularly around custodian insolvency, including the need to ensure customers’ crypto-based assets do form part of the custodian’s bankruptcy assets. FINMA also stresses that secure custody depends on appropriately monitored providers in Switzerland and abroad and clear bankruptcy-protection rules, while responsibility remains with the authorised financial institution even when third-party providers are used.