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Start with the service and legal-entity map
“Crypto prime broker” is a commercial description, not a uniform legal status. A provider may combine some services and outsource others; the protections and obligations can differ by service, asset, jurisdiction, and contracting entity. Identify the entity on each agreement and map which entity performs each activity before comparing providers.
- List the services in scope: execution, financing, settlement, custody, and reporting.
- For each service, identify the contracting entity, any regulated affiliate, and the jurisdiction governing the account and agreement.
- Map the venues, lenders, custodians, sub-custodians, and technology providers involved, including which party holds assets or collateral.
- Check each entity’s permissions against the relevant official register and confirm which activity, assets, geography, and client type those permissions cover.
Do not assume that a group-level brand, a regulated affiliate, or an entity’s status for one activity establishes protection for another entity or service.
Trace counterparty exposure through each transaction
For every trade and financing arrangement, determine when an obligation becomes binding, which entity owes settlement to your firm, where collateral sits, and what happens if a venue, dealer, broker, or affiliate defaults. The name on a screen or trade confirmation may not by itself show who bears the contractual obligation.
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A useful structural example—not a crypto rule—is FinCEN’s description of an OTC foreign-exchange and derivatives give-up arrangement: once a trade is accepted for give-up, it becomes binding between the executing dealer and prime broker, leaving the dealer exposed to the prime broker’s credit risk. The lesson to apply to crypto contracts is to identify the actual acceptance, settlement, and default mechanics, rather than assuming a trade remains solely between the client and execution venue. FinCEN guidance
- Ask which entity is principal for each execution, financing, settlement, and custody activity, and when it accepts a trade.
- Establish who owes you delivery or payment if a venue or an affiliate fails, and whether the broker remains liable.
- Review default triggers, close-out rights, netting provisions, and the timing and method of valuing positions on termination.
- Request executed master agreements, give-up and settlement terms, an entity chart, and any available close-out or netting opinions.
Assess credit, margin, and collateral terms
Measure not only the exposure a broker reports, but also how it calculates and can change that exposure. Separate unsecured balances from secured ones, and examine what happens to collateral in ordinary operations and after a default.
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- Ask how credit limits are set, monitored, and escalated, including stress and concentration limits.
- Review margin methodology, valuation inputs, collateral eligibility, haircuts, and the frequency of revaluation.
- Determine whether the broker may rehypothecate or otherwise reuse collateral, what consent is required, and whether the terms differ by asset or account.
- Check whether the broker can change limits or collateral terms, demand additional margin, or liquidate collateral, and what notice or dispute process applies.
Request the credit and margin methodology, collateral schedule, custody or control agreement, and any reuse consent. Compare provisions in the signed documents with the provider’s operational explanation.
Determine custody and insolvency treatment for each asset
Find out who holds each asset and how your interest is characterized under the agreement and applicable law. A balance shown in an account is not, by itself, evidence of a particular property right, segregation arrangement, or insolvency outcome. Review asset classification, account structure, governing law, and the actual custody agreement together.
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| Jurisdiction or regime | What the cited source establishes | How to apply it in diligence |
|---|---|---|
| United States | SEC staff FAQs state that non-security crypto assets are not protected by SIPA and may not be covered by another specific insolvency regime. The FAQs address particular broker-dealer custody and SIPA questions; they do not establish that every asset or account has the same treatment. SEC staff FAQs | Establish whether each asset is treated as a security for the relevant legal question and which entity holds it. Do not infer that broker-dealer status or SIPC membership protects every crypto balance. The SEC’s 2026 interpretation page describes a further interpretation concerning certain crypto assets and transactions; classification and consequences remain fact-specific. |
| European Union | MiCA Article 75 sets requirements for covered crypto-asset custody providers, including custody agreements, records, custody policies, periodic statements, return procedures, segregation, and liability for attributable loss. It requires covered providers to segregate client holdings from their own and legally and operationally from their estate. MiCA Article 75 | Confirm that the provider, service, client, and assets are within scope. A service marketed as prime brokerage is not automatically a custody service covered by Article 75; review the agreement and applicable law. |
| United Kingdom | FCA CASS 9 contains daily statement requirements for a prime-broker firm to which the relevant custody rules apply. FCA CASS 9 | Verify the firm and activity fall within scope before treating the daily requirement as applicable to your account or extending it to another crypto provider. |
| Switzerland | FINMA’s January 12, 2026 release highlights technology and infrastructure risks, complex legal issues around foreign custody—particularly if a custodian becomes insolvent—and the continuing responsibility of authorized financial institutions that use providers. FINMA release and linked Guidance 01/2026 | Identify the foreign custodian and relevant law, and review the underlying guidance for the regulated institution and activity in question. |
For each asset and jurisdiction, request the custody agreement, wallet and account structure, an explanation of whether the interest is proprietary, custodial, contractual, or otherwise characterized, and the return process. Ask for jurisdiction-specific legal analysis and, where available, a bankruptcy-remoteness or recovery opinion. These documents inform diligence; they do not replace review of the signed agreement and applicable law.
Test control of keys, transfers, and recovery separately
Ask who can authorize and execute transfers, how access is limited, and whether the provider can actually move the assets when required. Key control, the ability to transfer, and a workable recovery plan are related but distinct questions.
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In a December 17, 2025 statement, SEC Trading and Markets staff described conditions in which staff would not object to a broker-dealer deeming itself to have physical possession of customer crypto asset securities. Those conditions include direct access and transfer capability, a documented assessment of the ledger and network, controls against unauthorized key access, and plans for disruptions and insolvency-related transfers. This is a staff position in its stated broker-dealer context for crypto asset securities—not a universal custody standard for every crypto provider. SEC staff statement
- Identify who can initiate, approve, and complete transfers; request a key-control matrix and access-control description.
- Ask how key ceremonies, recovery, incident response, business continuity, and disaster recovery work, and request summaries or independent assurance reports.
- Review the provider’s documented approach to network changes, forks, airdrops, and chain disruptions.
- Ask what happens if a key, network, or service provider is unavailable, and how assets can be returned during disruption or insolvency.
- Request relevant incident disclosures and understand how control failures or transfer delays are escalated to clients.
Follow the custody chain and challenge outsourcing claims
Outsourcing does not remove the need to understand who holds assets, performs controls, or carries responsibility under the applicable regime. FINMA has warned that foreign custody can create complex legal issues, especially if the custodian becomes insolvent, and says responsibility remains with authorized financial institutions when they use providers. FINMA release
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EU delegated rules call for information on third-party custodians, delegated functions, sub-delegation, conflicts, and supervision. EU Delegated Regulation 2025/303
- Obtain the full service-provider map with legal names, jurisdictions, functions, and any sub-custodians.
- Ask how accounts or wallets are structured at each layer, and whether client assets remain identifiable in the provider’s books and records.
- Review outsourcing registers, conflict disclosures, oversight and audit rights, control reports, and subcontracting terms.
- Establish who can terminate a delegated arrangement and how assets and records will be returned or transitioned.
Compare reporting by what it lets you reconcile
A dashboard is useful only if its records let your team identify exposure and investigate discrepancies. Request redacted sample statements and field definitions; check that positions, transfers, liabilities, collateral, and margin can be reconciled against venue, custodian, and on-chain records. Confirm timestamps, valuation sources, reconciliation status, discrepancy escalation, and the service levels for resolving errors.
| Regime and scope | Statement interval established by the source | Information identified |
|---|---|---|
| FCA CASS 9, for a covered prime-broker firm subject to relevant custody rules | Daily. FCA CASS 9 | The cited material establishes the daily statement requirement; confirm the applicable rules and statement content for the firm and activity. |
| MiCA Article 75, for covered crypto-asset custody providers | At least once every three months and on client request. MiCA Article 75 | Assets, balance, value, and transfers. |
These intervals come from different legal regimes and apply only within their respective scopes. As a diligence matter, request reporting frequency and sample daily and periodic reports even where no cited rule establishes a particular interval. Check whether each report includes collateral, liabilities, margin, valuation method, timestamps, and reconciliation status, and how discrepancies and incidents are escalated.
Build a comparable evidence file for each provider
Use the same questions and document requests across candidates so that differences in contract structure or control are visible rather than hidden by inconsistent marketing descriptions.
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- Contracts and entities: executed master agreements, give-up and settlement terms, entity chart, default provisions, and available close-out or netting opinions.
- Credit and collateral: credit limits and monitoring, margin methodology, collateral schedule, stress and concentration limits, custody or control agreement, and reuse consent.
- Custody and recovery: custody agreements, wallet and account structure, jurisdiction-specific legal analysis, available bankruptcy-remoteness opinions, and asset return procedures.
- Controls and service providers: key-control matrix, independent assurance reports, incident disclosures, continuity and disaster-recovery summaries, provider map, outsourcing register, conflict disclosures, audit rights, and transition plans.
- Reporting: redacted sample statements, field definitions, valuation sources, timestamps, reconciliation controls, and escalation service levels.
- Regulatory perimeter: entity-specific permissions and registrations verified against official registers, matched to the activity, assets, client, and geography in your proposed arrangement.
Compare the documents with the actual account and transaction flow: a favorable statement about a group’s controls is not a substitute for identifying which entity has the obligation, which assets the control applies to, and what your agreement provides if that entity or a service provider fails.
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