The World Federation of Exchanges (WFE) has published a good practice guide for crypto asset custody service providers in an attempt to tighten up governance in the asset servicing sector.
The guide was issued in the wake of the FTX scandal in 2023, and a ruling was issued by US authorities earlier in August which, according to the WFE, “exemplifies the broader shift in expectations for the crypto industry to be held to higher standards closer to that of well-functioning finance, ensuring stronger protections for investors”.
The next step is addressing the inadequate custody controls among crypto platforms, according to WFE.
Among the recommendations are segregation of client assets in the event of a company’s bankruptcy; mature cyber security programmes; adequate insurance; independent audits and disclosure of risks in a clear and understandable way, especially for retail customers.
“The FTX collapse and longstanding worries about insufficient custody controls in the crypto industry highlight risks to both market integrity and investor protection,” said Nandini Sukumar, chief executive of the WFE.
