Digital Asset Custody Agreement

DIGITAL ASSET CUSTODY AGREEMENT

AGREEMENT EFFECTIVE DATE: [DATE]

AGREEMENT NUMBER: [CUSTODY-XXXX-XXXX]

PARTIES TO THIS AGREEMENT

CUSTODIAN:

• Legal Name: [CUSTODIAN LEGAL NAME]
• Entity Type: ☐ State-Chartered Trust Company ☐ National Bank ☐ Qualified Custodian
• Registration/Charter Number: [NUMBER]
• Primary Regulator: [SEC/OCC/STATE REGULATOR]
• Principal Place of Business: [ADDRESS]
• Contact Information: [EMAIL/PHONE]

CLIENT:

• Legal Name: [CLIENT LEGAL NAME]
• Entity Type: ☐ Individual ☐ Corporation ☐ LLC ☐ Trust ☐ Registered Investment Adviser ☐ Registered Fund ☐ Other: [SPECIFY]
• Tax Identification Number: [EIN/SSN]
• Principal Place of Business/Residence: [ADDRESS]
• Authorized Representative: [NAME AND TITLE]
• Contact Information: [EMAIL/PHONE]

RECITALS

WHEREAS, Client desires to engage Custodian to provide safekeeping and custody services for certain digital assets, cryptocurrencies, and blockchain-based assets;

WHEREAS, Custodian is duly licensed, chartered, and/or registered to provide digital asset custody services and maintains appropriate regulatory authorizations;

WHEREAS, the parties wish to establish the terms and conditions governing the custody relationship in compliance with applicable securities laws, banking regulations, and digital asset regulatory requirements;

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein, the parties agree as follows:

ARTICLE 1: DEFINITIONS

1.1 "Digital Assets" means any digital representation of value that is recorded on a cryptographically secured distributed ledger or any similar technology, including but not limited to: (a) cryptocurrencies such as Bitcoin and Ethereum; (b) stablecoins; (c) utility tokens; (d) security tokens; (e) non-fungible tokens (NFTs); (f) wrapped tokens; and (g) any derivative or synthetic digital asset.

1.2 "Custodied Assets" means all Digital Assets deposited with or transferred to Custodian for safekeeping under this Agreement.

1.3 "Private Key" means the cryptographic key(s) required to authorize transactions involving Digital Assets on a blockchain or distributed ledger.

1.4 "Public Key" or "Wallet Address" means the cryptographic identifier that serves as the destination address for Digital Assets on a blockchain.

1.5 "Cold Storage" means offline storage of Private Keys in a manner not connected to the internet or any network.

1.6 "Hot Wallet" means storage of Digital Assets where Private Keys are maintained on systems connected to the internet.

1.7 "Multi-Signature" or "Multi-Sig" means a security protocol requiring multiple Private Keys to authorize a transaction.

1.8 "Staking" means the process of locking Digital Assets to participate in a proof-of-stake blockchain's consensus mechanism.

1.9 "Fork" means a change to a blockchain protocol that may result in the creation of new Digital Assets.

1.10 "Airdrop" means the distribution of Digital Assets to wallet holders, typically at no cost to the recipient.

ARTICLE 2: APPOINTMENT AND SCOPE OF SERVICES

2.1 Appointment as Custodian

Client hereby appoints Custodian as the exclusive custodian for the Custodied Assets described herein, and Custodian accepts such appointment subject to the terms of this Agreement.

2.2 Custody Services

Custodian shall provide the following services:

☐ Core Custody Services:

• Safekeeping of Digital Assets
• Secure storage of Private Keys
• Generation and management of Wallet Addresses
• Transaction execution upon Client instruction
• Account statements and reporting

☐ Enhanced Security Services:

• Multi-signature wallet architecture
• Cold storage solutions
• Hardware security module (HSM) protection
• Geographic distribution of key storage
• Disaster recovery and business continuity

☐ Ancillary Services:

• Staking services (if elected per Schedule B)
• Airdrop and Fork processing
• Tax lot tracking and reporting
• Blockchain analytics and monitoring
• Sub-custody arrangements

2.3 Eligible Digital Assets

Schedule A sets forth the Digital Assets eligible for custody under this Agreement. Custodian reserves the right to add or remove Digital Assets from Schedule A upon thirty (30) days' written notice to Client.

ARTICLE 3: CUSTODY STANDARDS AND SECURITY

3.1 Segregation of Assets

3.1.1 Custodian shall hold all Custodied Assets separately from Custodian's proprietary assets and separately identifiable from assets of other clients.

3.1.2 Custodied Assets shall be held in wallets that are clearly identified as belonging to Client on Custodian's books and records.

3.1.3 Custodian shall maintain records sufficient to trace ownership of all Custodied Assets at all times.

3.2 Storage Requirements

3.2.1 Custodian shall store a minimum of [PERCENTAGE]% of Client's Custodied Assets in Cold Storage.

3.2.2 Hot Wallet holdings shall not exceed [PERCENTAGE]% of total Custodied Assets without Client's written consent.

3.2.3 Custodian shall implement Multi-Signature controls requiring a minimum of [NUMBER] of [NUMBER] signatures for any withdrawal transaction.

3.3 Security Infrastructure

Custodian represents and warrants that it maintains security infrastructure consistent with industry best practices, including:

☐ NIST Cybersecurity Framework compliance
☐ SOC 2 Type II certification
☐ ISO 27001 certification
☐ Regular penetration testing (minimum quarterly)
☐ 24/7 security monitoring
☐ Intrusion detection systems
☐ Hardware Security Modules (HSMs) for key management
☐ Geographic distribution of key shards
☐ Biometric access controls for secure facilities
☐ Background checks for all personnel with key access

3.4 Insurance Coverage

3.4.1 Custodian shall maintain insurance coverage for Custodied Assets with the following minimum coverage:

3.4.2 Upon Client's request, Custodian shall provide certificates of insurance evidencing such coverage.

ARTICLE 4: DEPOSITS AND WITHDRAWALS

4.1 Deposit Procedures

4.1.1 Client shall deposit Digital Assets only to Wallet Addresses provided by Custodian.

4.1.2 Custodian shall credit Client's account upon [NUMBER] blockchain confirmations for the applicable Digital Asset.

4.1.3 Client acknowledges that deposits sent to incorrect addresses may result in permanent loss.

4.2 Withdrawal Procedures

4.2.1 Client may request withdrawals by submitting a Withdrawal Request Form through:
☐ Custodian's secure portal
☐ Authenticated API connection
☐ Other approved method: [SPECIFY]

4.2.2 Withdrawal requests shall include:

• Digital Asset type and amount
• Destination Wallet Address
• Authorization from Authorized Signatories

4.2.3 Custodian shall process withdrawal requests within:

• Hot Wallet withdrawals: [NUMBER] business hours
• Cold Storage withdrawals: [NUMBER] business days

4.2.4 Custodian may delay or refuse withdrawal requests if:

• Reasonable grounds exist to suspect fraud or unauthorized access
• Compliance with applicable laws or regulations requires additional verification
• The request exceeds pre-approved withdrawal limits
• Technical issues affect the blockchain network

4.3 Authorized Signatories

4.3.1 Client shall designate Authorized Signatories as set forth in Schedule C.

4.3.2 For withdrawals exceeding $[AMOUNT], dual authorization from separate Authorized Signatories is required.

4.3.3 Changes to Authorized Signatories require written notice with appropriate corporate authorization.

ARTICLE 5: PROHIBITED ACTIVITIES AND ASSET USE

5.1 No Lending, Pledging, or Hypothecation

5.1.1 Custodian shall NOT lend, pledge, hypothecate, rehypothecate, or otherwise encumber any Custodied Assets without the prior written consent of Client.

5.1.2 Custodied Assets shall not be used by Custodian for any proprietary trading, lending, or investment purposes.

5.2 No Commingling

Custodied Assets shall not be commingled with:

• Custodian's proprietary assets
• Assets of other clients (except in omnibus arrangements with proper sub-accounting)
• Any bankruptcy estate of Custodian

5.3 Client Ownership

5.3.1 Client retains full legal and beneficial ownership of all Custodied Assets at all times.

5.3.2 Custodied Assets shall be treated as Client's property and not as general assets of Custodian.

ARTICLE 6: FORKS, AIRDROPS, AND STAKING

6.1 Hard Forks and Soft Forks

6.1.1 In the event of a Fork affecting Custodied Assets, Custodian shall:

☐ Option A: Automatically credit Client with any new Digital Assets resulting from the Fork
☐ Option B: Consult with Client before taking any action regarding Forked assets
☐ Option C: Support only Forks listed on Schedule A; other Forked assets [DISPOSITION]

6.1.2 Custodian shall provide notice of material Forks within [NUMBER] hours of becoming aware.

6.1.3 Custodian is not obligated to support every Fork and may decline to credit Forked assets that present security, legal, or operational concerns.

6.2 Airdrops

6.2.1 Custodian shall use commercially reasonable efforts to claim Airdrops on behalf of Client.

6.2.2 Airdropped assets shall be credited to Client's account unless:

• The Airdrop requires actions that pose security risks
• The Airdrop involves assets not supported by Custodian
• Legal or regulatory concerns exist

6.3 Staking Services

6.3.1 If Client elects staking services per Schedule B, Custodian shall:

• Stake designated Digital Assets in accordance with Client's instructions
• Credit staking rewards to Client's account
• Provide reports on staking activity and rewards

6.3.2 Client acknowledges staking risks including:

• Slashing penalties for validator misconduct
• Lock-up periods affecting liquidity
• Variable reward rates
• Protocol changes affecting staking mechanics

ARTICLE 7: REPORTING AND RECORDS

7.1 Account Statements

Custodian shall provide Client with account statements:

☐ Monthly
☐ Quarterly
☐ Upon request

Statements shall include:

• Beginning and ending balances by Digital Asset
• All deposits, withdrawals, and transfers
• Staking rewards and other income
• Fork and Airdrop credits
• Fees charged

7.2 Tax Reporting

7.2.1 Custodian shall provide information reasonably necessary for Client's tax reporting, including cost basis information where available.

7.2.2 Custodian shall issue applicable tax forms (e.g., Form 1099-DA) as required by the IRS beginning with the 2025 tax year.

7.2.3 Client remains solely responsible for tax compliance related to Custodied Assets.

7.3 Audit Rights

Client or Client's designated auditors may, upon reasonable notice, audit Custodian's records relating to Custodied Assets.

ARTICLE 8: FEES

8.1 Fee Schedule

Client shall pay Custodian the fees set forth in Schedule D, which may include:

8.2 Fee Payment

8.2.1 Fees shall be invoiced [MONTHLY/QUARTERLY] in arrears.

8.2.2 Fees may be paid in:
☐ U.S. Dollars
☐ Designated stablecoins
☐ Deducted from Custodied Assets (with Client's prior written consent)

8.3 Fee Changes

Custodian may modify fees upon sixty (60) days' written notice. Client may terminate this Agreement without penalty if fees increase by more than [PERCENTAGE]%.

ARTICLE 9: REPRESENTATIONS AND WARRANTIES

9.1 Custodian Representations

Custodian represents and warrants that:

(a) It is duly organized, validly existing, and in good standing under applicable law;

(b) It holds all licenses, registrations, and authorizations required to provide the services under this Agreement;

(c) It complies with all applicable anti-money laundering (AML) and know-your-customer (KYC) requirements;

(d) It maintains security infrastructure consistent with industry best practices;

(e) It has implemented written policies and procedures for digital asset custody;

(f) It is not subject to any pending regulatory action that would materially impair its ability to perform under this Agreement.

9.2 Client Representations

Client represents and warrants that:

(a) It has full power and authority to enter into this Agreement;

(b) All Digital Assets deposited are legally owned by Client and free of liens or encumbrances (unless disclosed);

(c) Digital Assets were not obtained through illegal activity;

(d) Client has completed all required AML/KYC documentation truthfully;

(e) Client will comply with all applicable laws regarding the Digital Assets;

(f) If Client is an investment adviser or fund, it has determined that use of Custodian's services is in the best interest of its clients/shareholders.

ARTICLE 10: RISK DISCLOSURES

10.1 Acknowledgment of Risks

Client acknowledges and accepts the following risks associated with Digital Asset custody:

☐ Technology Risk: Blockchain networks may experience bugs, vulnerabilities, or failures
☐ Cybersecurity Risk: Despite security measures, theft or loss from hacking remains possible
☐ Regulatory Risk: Laws governing Digital Assets may change, potentially affecting custody arrangements
☐ Market Risk: Digital Asset values are highly volatile
☐ Liquidity Risk: Certain Digital Assets may become illiquid or untradeable
☐ Fork Risk: Forks may result in loss of value or operational complications
☐ Protocol Risk: Smart contract failures may affect token functionality
☐ Counterparty Risk: Sub-custodians or service providers may fail to perform
☐ Loss of Access: Technical failures could temporarily prevent access to Custodied Assets

10.2 No Guarantee

Custodian does not guarantee against loss of Custodied Assets and shall only be liable as expressly provided in this Agreement.

ARTICLE 11: LIMITATION OF LIABILITY AND INDEMNIFICATION

11.1 Limitation of Liability

11.1.1 Custodian's liability for any loss of Custodied Assets shall be limited to the fair market value of the lost assets at the time of loss, as determined by reference to [PRICING SOURCE].

11.1.2 Custodian shall not be liable for:

• Losses caused by Client's negligence or failure to follow security procedures
• Losses resulting from Force Majeure events
• Indirect, consequential, incidental, or punitive damages
• Losses arising from blockchain network failures or protocol vulnerabilities not reasonably foreseeable

11.1.3 In no event shall Custodian's aggregate liability exceed [AMOUNT OR FORMULA].

11.2 Indemnification by Client

Client shall indemnify and hold harmless Custodian from any claims, losses, or expenses arising from:

• Client's breach of this Agreement
• Client's violation of applicable laws
• Third-party claims related to Client's Digital Assets
• Instructions given by Client or Authorized Signatories

11.3 Indemnification by Custodian

Custodian shall indemnify and hold harmless Client from any claims, losses, or expenses arising from:

• Custodian's gross negligence or willful misconduct
• Custodian's breach of this Agreement
• Unauthorized transactions caused by Custodian's security failures

ARTICLE 12: REGULATORY COMPLIANCE

12.1 AML/KYC Compliance

12.1.1 Custodian shall maintain an AML compliance program consistent with the Bank Secrecy Act, FinCEN regulations, and applicable state requirements.

12.1.2 Client shall provide all documentation reasonably requested for AML/KYC purposes and shall promptly notify Custodian of any changes to such information.

12.2 Regulatory Examination

Custodian shall cooperate with examinations by its primary regulator(s) concerning Custodied Assets and shall notify Client of any examination findings that materially affect Client.

12.3 Subpoenas and Legal Process

Custodian may comply with subpoenas, court orders, or regulatory requests relating to Custodied Assets without Client's consent, but shall provide notice to Client unless prohibited by law.

ARTICLE 13: SUB-CUSTODY

13.1 Sub-Custodian Approval

☐ Custodian may use sub-custodians without prior approval, subject to due diligence requirements
☐ Custodian must obtain Client's written approval before using any sub-custodian

13.2 Sub-Custodian Standards

Any sub-custodian must:

• Be subject to regulation by a recognized authority
• Maintain security standards equivalent to Custodian's standards
• Agree to segregation and non-rehypothecation requirements
• Carry appropriate insurance coverage

13.3 Custodian Responsibility

Custodian shall remain responsible for the acts and omissions of its sub-custodians as if performed by Custodian.

ARTICLE 14: TERM AND TERMINATION

14.1 Term

This Agreement shall commence on the Effective Date and continue until terminated by either party.

14.2 Termination for Convenience

Either party may terminate this Agreement upon [NUMBER] days' written notice.

14.3 Termination for Cause

Either party may terminate immediately upon:

• Material breach that remains uncured for [NUMBER] days after written notice
• Insolvency, bankruptcy, or regulatory action against the other party
• Loss of required licenses or authorizations

14.4 Effect of Termination

Upon termination:

14.4.1 Client shall designate a successor custodian or withdrawal addresses within [NUMBER] days.

14.4.2 Custodian shall transfer Custodied Assets to designated addresses within [NUMBER] business days of receiving valid instructions.

14.4.3 All outstanding fees shall become immediately due and payable.

14.4.4 Custodian may retain Custodied Assets until all amounts owed are paid.

ARTICLE 15: CONFIDENTIALITY

15.1 Confidential Information

Each party shall maintain the confidentiality of the other party's Confidential Information, including Client's identity, account balances, and transaction history.

15.2 Permitted Disclosures

Confidential Information may be disclosed:

• As required by law or regulation
• To auditors, legal counsel, or regulators
• With the other party's written consent
• To service providers bound by confidentiality obligations

ARTICLE 16: DISPUTE RESOLUTION

16.1 Governing Law

This Agreement shall be governed by the laws of [STATE], without regard to conflicts of law principles.

16.2 Dispute Resolution

☐ Arbitration: Disputes shall be resolved by binding arbitration under [AAA/JAMS] rules in [CITY, STATE]
☐ Litigation: Disputes shall be resolved in the state or federal courts of [JURISDICTION]

16.3 Waiver of Jury Trial

TO THE EXTENT PERMITTED BY LAW, EACH PARTY WAIVES ANY RIGHT TO A JURY TRIAL.

ARTICLE 17: GENERAL PROVISIONS

17.1 Entire Agreement

This Agreement, including all Schedules, constitutes the entire agreement between the parties and supersedes all prior negotiations and agreements.

17.2 Amendments

This Agreement may be amended only by written instrument signed by both parties, except that Custodian may amend Schedules A and D upon notice as provided herein.

17.3 Assignment

Neither party may assign this Agreement without the other party's written consent, except that Custodian may assign to an affiliate or in connection with a merger or acquisition.

17.4 Severability

If any provision is held invalid, the remaining provisions shall continue in effect.

17.5 Notices

All notices shall be in writing and delivered to the addresses set forth above or as updated in writing.

17.6 Force Majeure

Neither party shall be liable for delays or failures caused by circumstances beyond its reasonable control, including natural disasters, war, terrorism, pandemic, or government action.

REGULATORY DISCLOSURES

SEC DISCLOSURE: This custody arrangement is subject to applicable securities laws. If Client is a registered investment adviser or registered fund, this Agreement is intended to comply with custody requirements under the Investment Advisers Act of 1940 and/or Investment Company Act of 1940, including guidance issued by the SEC Division of Investment Management regarding digital asset custody.

BANKING DISCLOSURE: Custodian's digital asset custody services are [ARE/ARE NOT] FDIC insured. Digital asset holdings are not bank deposits and are not protected by FDIC or SIPC insurance.

STATE TRUST COMPANY DISCLOSURE: [If applicable] Custodian is a [STATE] chartered trust company regulated by [REGULATOR]. Custodian operates pursuant to [APPLICABLE REGULATIONS].

RISK WARNING: Digital assets are highly volatile and speculative. Past performance is not indicative of future results. Client should only deposit Digital Assets that Client can afford to lose.

SIGNATURES

CUSTODIAN:

Signature: _________________________________

Name: [NAME]

Title: [TITLE]

Date: [DATE]

CLIENT:

Signature: _________________________________

Name: [NAME]

Title: [TITLE]

Date: [DATE]

SCHEDULE A: ELIGIBLE DIGITAL ASSETS

SCHEDULE B: STAKING SERVICES

☐ Client ELECTS staking services for the following Digital Assets:

☐ Client DECLINES staking services at this time.

Staking Terms:

• Slashing risk acknowledged: ☐ Yes
• Custodian staking fee: [PERCENTAGE]% of rewards
• Reward distribution: ☐ Daily ☐ Weekly ☐ Monthly

SCHEDULE C: AUTHORIZED SIGNATORIES

Dual Authorization Required for Withdrawals Exceeding: $[AMOUNT]

SCHEDULE D: FEE SCHEDULE

Fee Effective Date: [DATE]

This template is provided for informational purposes and should be reviewed and customized by qualified legal counsel familiar with digital asset custody regulations in your jurisdiction.