Custody Agreements: Due-Diligence and Negotiation Checklists

Purpose of the appendix. This appendix collects in working form the custody material developed in Chapters 7, 9, 10, 11, 12, 27, 28 and 37, with the fiduciary material of Chapters 14 to 16. Each checklist states a question to ask or a step to take, and each item gives the paragraph of the treatise where the reasoning and the authority appear. The checklists restate propositions made in the chapters. They add no new law, and a reader who relies on an item should read the paragraph it cites.

Who the checklists serve. The checklists are written for the person who places digital assets with a custodian or advises someone who does: an individual owner, a trustee or personal representative, an investment adviser or fund, an operating company holding treasury assets, and a lender taking collateral held by a custodian. Where the position of one of these differs from the others, the item says so. The checklists are not written for the custodian, although a custodian preparing its own agreement or responding to a diligence request may use them to anticipate what a careful customer will ask.

The two questions behind every item. Every item in this appendix serves one of two questions that Chapter 9 identifies as common to every custody model. The first is who can move the assets, and in particular whether any one person or system can move them alone. The second is whose property the assets are if the custodian fails. See ¶ 901.03. The first question is answered by the key-management arrangements and the operational controls. The second is answered by the custody agreement, the custodian's records and the insolvency law that governs the custodian. See ¶¶ 1001.04, 2880.02. A diligence review or a negotiation that addresses only one of the two questions leaves the customer exposed on the other.

The lesson of the 2022 failures. The cases decided after the platform failures of 2022 show that ownership follows the documents and the records. Where the terms gave the platform title and a right of use, customer assets became property of the estate. Where the terms reserved title to the customer and the platform held the assets in segregated wallets, the assets remained the customer's. Where the records could not identify the customer's assets, a claimed trust failed for want of traceable property. See ¶¶ 1060.05, 2880.02, 2720.06. The checklists in ¶¶ E20 and E30 are built to produce a set of documents and records that would survive that analysis.

Currency of the law. The law is stated as of November 2026. Several regimes referred to in the checklists were changing at that date. The GENIUS Act takes effect on January 18, 2027, and its custody provision in section 10 applies from that date. See ¶¶ 3701.04, 1110.05. The SEC staff's 2025 no-action position on state trust companies as qualified custodians and the 2025 rescissions by the federal banking agencies are discussed at ¶¶ 1130.02 and 1150.05. A reader using the checklists after the date of this edition should confirm the current position of each regime before relying on an item that depends on it.

Organization. Table E-1 lists the checklists in this appendix and the chapters from which each is drawn.

Table E-1. The checklists in this appendix

Conventions. In the checklists, "customer" means the person for whom the custodian holds the assets, whether an individual, a fiduciary, a fund or a company. "Custodian" includes a bank, trust company, broker-dealer, exchange or other intermediary that holds keys for others. "Agreement" means the custody agreement or terms of service together with any program-specific terms and any schedule of supported assets. A reference such as "see ¶ 1090.04" is to the paragraph of the treatise in which the point is discussed.