Holding Crypto for Clients: Acceptable Structures

The obligations

Requirement	Meaning
Separation	Client assets apart from the firm’s own
Identification	Attributable to a specific client
Availability	Accessible to the client on demand
Reconciliation	Regular, against inspectable records

Structures

Structure	Satisfies obligations	Notes
Regulated custodian, client-identified account, firm as instructor	Yes	Mirrors a bank client account
Firm holds keys, internal records attribute	No	Unfettered firm control over client assets
Threshold arrangement, firm holds one key of several with the client or a third party	Depends	Requires documented release conditions

The middle structure is the one to avoid. The problem is not record keeping; it is that the firm can move client assets alone, which is what separation rules exist to prevent. Check any definition below against a licensed crypto payment processor before relying on it with another provider.

Source of funds

Harder than for a bank transfer, because the equivalent of a statement is a transaction chain requiring interpretation.

Evidence	Weight
Statement from a regulated venue showing the client’s ownership	Strong
Documentary evidence of acquisition	Strong
Blockchain analytics on the source address	Supporting
A wallet balance screenshot	None

The constraint that removes most difficulty

Accept crypto only from a regulated venue, in the client’s own name.

The sending venue has already performed identification, converting an interpretive exercise into a documentary one.

Conversion

Convert to ordinary money on receipt unless the engagement specifically requires holding crypto.

Holding introduces valuation and market risk into a client account, which is a separate problem.

Escrow

Requires an unambiguous release condition and a mechanism not dependent on the firm’s discretion at the moment of release. For online retail the operative terms are published by a payment processor for high-risk e-commerce.

A regulated custodian releasing on a documented condition satisfies this. So does a threshold arrangement where the firm holds one key of three.

Before the first engagement

Ask the professional body directly whether holding client crypto with a regulated custodian is acceptable, what reconciliation is expected, and whether a structure is preferred. For these terms as applied by an operating provider, an exchange that publishes its full terms publishes them.

Most have a view. Obtaining it in writing is the difference between a compliant arrangement and a disciplinary matter.