Section 10Part 2 — Registered Persons and Virtual Asset Service Licensees
Requirements: virtual asset custody services
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The Authority may, where necessary, impose requirements on a licensee that provides virtual asset custody services including —
net worth requirements;
reporting requirements;
disclosures to clients concerning the transparency of operations including the risks associated with the custodial arrangements, internal safeguards, the methods of access to virtual assets held and insurance arrangements;
requirements for the safekeeping of client assets, including the segregation of assets, insurance requirements and cybersecurity measures; and
any other requirement the Authority determines is in the best interest of the beneficial owners of the assets held by the licensee.
A virtual asset custodian shall not, unless specifically agreed to by the beneficial owners of the virtual assets —
encumber; or
have encumbered by a third party, virtual asset deposits held on behalf of clients.
A virtual asset service licensee that is providing virtual asset custody services shall —
enter into a custodial arrangement with the owner of a virtual asset listing at a minimum — Virtual Asset (Service Providers) Act (2024 Revision) Section 11
the manner in which the virtual assets are to be held;
the transactions that the custodian is permitted to engage in and the manner in which the transactions are to be conducted;
disclosures relating to the risks present in the safekeeping of the virtual assets and any mitigating factors;
fees, spreads or other remuneration to the custodian;
the manner in which the client may access the virtual assets and how the custodial arrangement may be terminated;
information related to the licensee’s security safeguards;
remedies available to the owner upon the unforeseeable loss of the virtual assets by the custodian; and (vii) any other information specified by the Authority;
maintain information technology best practices relating to virtual assets held in custody;
ensure that all ancillary or subsidiary proceeds relating to virtual assets held in custody shall accrue to the benefit of the owner of the virtual asset unless otherwise agreed to with the owner in writing;
take such steps as may be necessary to safeguard the virtual assets held on behalf of third parties; and
have adequate safeguards against theft and loss.
A licensee providing virtual asset custody services shall comply with applicable requirements under this section and a person who contravenes this provision commits an offence and is liable on conviction to a fine of one hundred thousand dollars.