Custody arrangement review: stages and deadlines
A custody arrangement review moves through five stages: scoping, document collection, internal sign-off, negotiation, and execution. Each stage carries its own deadline, set by the parties rather than a public register. The process typically closes within four to six weeks, provided the custodian responds on time. After execution, the arrangement binds until formally terminated.
What triggers the review
A review usually starts when a token issuer needs a third party to hold reserve assets, collateral, or client tokens on its behalf. It can also start when an existing custodian changes its terms, its sub-custody chain, or its insurance cover. The trigger matters less than the response: someone inside the issuing entity has to own the file from the first day, or the stages below drift without a deadline.
The review is an internal control exercise. It does not by itself create or remove a legal obligation; it confirms whether a proposed custody arrangement meets the issuer's own risk appetite and operational standards before assets move.
Documents you need to start
Collection is the stage most often underestimated. Before the review can proceed, the treasury desk needs the following on file:
- Draft custody agreement, including the segregation clause and the sub-custody chain, if one exists.
- Evidence of insurance or equivalent financial protection held by the custodian.
- Key management and access-control description, covering who can authorise a withdrawal.
- Recent independent audit or attestation report covering the custodian's controls.
- A wind-down or exit plan describing what happens if the custodian ceases trading.
Where any of these documents contain personal data of named signatories or beneficial owners, handling follows the same two-role, two-basis logic described in our Privacy notice: two roles, two bases in detail, which sets out who is a controller and who is a processor for each document category.
Stages and deadlines
The table below reflects a typical file. Complex arrangements, multiple sub-custodians, or a slow counterparty extend the right-hand column; nothing here is a statutory deadline.
| Stage | Owner | Typical duration |
|---|---|---|
| 1. Scoping | Legal team | 2–3 business days |
| 2. Document collection | Treasury desk | 5–10 business days |
| 3. Internal risk review | Compliance officer | 5–7 business days |
| 4. Negotiation of terms | External counsel | 5–15 business days |
| 5. Approval and signature | Authorised signatory | 1–3 business days |
| 6. Asset transfer | Treasury desk | same day once approved |
Stage six is the point of no return. Once the first tranche of assets moves into the custody account, unwinding the arrangement requires a formal termination notice, not a change of mind.
What to do, step by step
- Legal team scopes which assets, entities, and counterparties fall inside the review.
- Treasury desk requests the draft agreement and the document set listed above.
- Compliance officer checks segregation, sub-custody depth, insurance, and the most recent audit.
- External counsel negotiates liability caps, notice periods, and exit mechanics.
- Authorised signatory reviews the negotiated file and signs.
- Treasury desk executes the first transfer and records the date as the point of no return.
Who decides
Approval sits with the authorised signatory named in the issuer's internal signing policy, not with the custodian. Where the file raises a disputed point, typically liability caps or the sub-custody chain, escalation goes to the issuer's senior management committee rather than to external counsel. External counsel advises; it does not approve.
If the process forks
If the issuer already has a custody relationship with the same provider, the review shortens to a variation exercise: only the changed clauses go through stages three and four again.
If the custodian proposes a new sub-custodian mid-review, add a dedicated diligence step before negotiation resumes. Treat the sub-custodian as a fresh counterparty, not an appendix to the existing file.
If the custodian is slow to respond, the file does not stall by default. The term sheet should already carry a response window; once it lapses, the treasury desk escalates in writing and sets a fresh date, rather than waiting indefinitely.
What this review does not cover
This page describes an internal control sequence. It does not select a custodian, does not price the arrangement, and does not settle which jurisdiction's courts would hear a dispute if the custodian later failed. Selection criteria and jurisdictional exposure are separate exercises, each with its own file.
Sources and limits
This overview reflects an internal procedural playbook, reviewed on a rolling basis. No statute, regulation, or article number is cited here, because the timetable above is set by the parties, not by a public deadline, and a specific citation would not be checkable against this file.
If a subprocessor changes hands during the life of the custody relationship, the first steps are different from a standard renegotiation; see the Counterparty report when a subprocessor is added.
If one of the collected documents is a translation and its accuracy is later disputed, the custody file itself will not tell you what to do next; see the Document report when a translation is disputed.
If the custodian fails after execution and a claim becomes likely, the choice of forum carries its own cost of getting it wrong; see the Jurisdiction report before choosing where to file.
Related reading
A custody review often runs alongside changes to the token's own supply mechanics. For that adjacent file, see Supply change procedure step by step.
Frequently asked questions
How long does custody arrangement review take in practice?
Four to six weeks is typical for a first-time arrangement with a full document set. A variation of an existing relationship can close inside two weeks. The main variable is how quickly the custodian returns documents at stage two.
Which documents are needed to start?
At minimum: the draft custody agreement, evidence of insurance, the key management description, the most recent independent audit, and a wind-down plan. Missing any one of these delays stage three rather than stopping the file outright.
What happens if the other side does not respond?
The response window agreed in the term sheet governs this, not a public deadline. Once that window lapses, the treasury desk escalates in writing, sets a new date, and records the delay in the file rather than letting the review stall without a record.