Sub-Custody

Overview

The arrangement can support regional markets, specialized assets, digital-key infrastructure, or operational scale. The primary provider maintains the client relationship while a sub-custodian controls an account, wallet, key layer, or settlement function underneath it.

Delegation does not remove the primary provider’s contractual responsibilities unless agreements say otherwise. Clients may face limited direct rights against the sub-custodian. Changes, insolvency, outages, liens, or data gaps at the lower layer can affect access and reconciliation.

Due diligence should map the complete custody chain, legal title, accounts, asset use, subdelegation, and jurisdictions. Contracts need notice and exit provisions. Records should reconcile client obligations, primary statements, and underlying custody evidence. Business continuity should address replacement, asset transfer, and customer communication when a sub-custody relationship fails.

For Sub-Custody, risks include key compromise, insider abuse, commingling, inaccurate books, unsupported tokens, provider insolvency, sub-custodian failure, blocked withdrawals, lost recovery material, and ambiguous liability. For Sub-Custody, controls should combine least privilege, separation of duties, verified destinations, asset segregation, limits, monitoring, and continuity tests.

Sub-Custody works through controlled onboarding, asset receipt, internal attribution, storage-tier assignment, authorization, signing or provider instruction, monitoring, withdrawal, reconciliation, reporting, and return or migration. For Sub-Custody, each handoff needs stable identifiers and an authoritative record of who approved and executed it.

The operating model for Sub-Custody should map legal ownership, beneficial entitlement, technical control, account structure, asset segregation, supported networks, signing policy, provider roles, contractual duties, and insolvency treatment. For Sub-Custody, these dimensions can belong to different parties and must not be inferred from a wallet label.