Swiss Regulator FINMA Outlines New Rules on Crypto Custody Risks and Bank Requirements

TLDR

• FINMA highlights cyber, counterparty, and insolvency risks in crypto custody

• Segregated crypto custody may qualify for capital relief under Swiss law

• Portfolio managers must use prudentially supervised custodians

• Investors must receive clear risk notices for crypto-based products

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Switzerland’s financial regulator has released new guidance addressing the custody of crypto-based assets. The document outlines operational, legal, and counterparty risks linked to holding digital assets. It also sets expectations for banks, asset managers, and product issuers. The guidance aims to strengthen investor protection and market stability.

On 12 January, the Swiss Financial Market Supervisory Authority published Guidance 2026/1. The release focuses on crypto custody within banking, portfolio management, and product offerings. It also addresses disclosure duties toward investors under existing financial laws.

FINMA stated that crypto-based assets remain highly speculative. Institutions must treat custody risks with the same rigor as traditional assets.

Operational and Counterparty Risks in Crypto Custody

FINMA noted that crypto-based assets face unique operational risks. These include cyber-attacks, private key loss, and technical failures. Since assets are stored on blockchains, access depends on secure key management.

Counterparty risk arises when custody is delegated to third parties. If a custodian becomes insolvent, asset segregation may not be guaranteed. This risk increases when custodians are based abroad or lack prudential supervision.

FINMA also emphasized volatility risks. Cryptocurrencies are subject to sharp price swings. Stablecoins may reduce this risk only when backed by physical assets.

FINMA Custody Rules for Portfolio and Asset Management Activities

For individual portfolio management, FINMA requires crypto-based assets to be held in segregated custody. Custodians must be banks, securities firms, or institutions under equivalent supervision. This rule also applies to foreign custodians.

Portfolio managers must conduct due diligence before onboarding custodians. They must also monitor custody arrangements on an ongoing basis. These procedures should be documented in internal policies.

Exceptions are allowed in limited cases. Managers may use custodians without full equivalence if clients are fully informed. Written client consent is also required. FINMA stated that regulatory requirements cannot be bypassed using foreign structures.

Collective Investments and Structured Crypto Products

For Swiss collective investment schemes, crypto-based assets must be held by a Swiss depositary bank. Custody may be delegated to third parties if supervision and bankruptcy protection are equivalent.

FINMA confirmed that existing rules under the Collective Investment Schemes Act apply equally to crypto assets. Investors must be informed of custody risks through prospectuses and key information documents.

Crypto-based structured products and exchange-traded products fall under the Financial Services Act. Both SIX Swiss Exchange and BX Swiss already require specific collateral rules for crypto ETPs. These frameworks remain unchanged under the new guidance.

Investor Communication and Risk Disclosure Requirements

FINMA stressed that crypto-based assets are not considered safe investments. Even when custody rules are met, assets remain speculative and volatile.

Financial institutions must provide clear risk notices to investors. These disclosures must explain the potential for substantial losses. The requirement applies across banking, asset management, and product distribution.

According to FINMA, transparent communication is essential for market integrity. Institutions must ensure that investors understand custody, volatility, and insolvency risks before investing.

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