According to TechFlame, the New York State Department of Financial Services (NYDFS) has released updated guidance for licensed cryptocurrency custodian entities (VCEs), as reported by FinanceFeeds. The core requirement of the guide is that the custodian structure must ensure that beneficial ownership of digital assets always belongs to the customer, and that customer assets are also protected, especially when the custodian entity faces bankruptcy. NYDFS said the update was in response to a surge in demand for virtual asset custody from institutional and retail customers, as well as increasingly complex “sub-escrow” relationships in the industry. The new guidelines clearly prohibit custodians from using customer assets for activities that may damage customer ownership, such as remortgages or unsecured loans, without explicit permission and informed consent. At the same time, stricter due diligence, contract terms, and information disclosure requirements have been put forward for custodians to use sub-custodians. The guide is designed to provide customers with greater clarity and confidence, and to encourage licensed entities to review their escrow structures and customer agreements. This updated 2025 guide is now in effect and has replaced the previous version from January 2023.