Non-Custodial Exclusion refers to a regulatory principle or provision that exempts entities from certain obligations if they do not hold or control client assets. This concept distinguishes between platforms that maintain custody of funds and those that merely facilitate transactions without possessing user private keys. It is a key factor in determining the scope of regulatory oversight.
Context
The non-custodial exclusion is a central point of debate in the regulation of decentralized finance (DeFi) and self-custody solutions within the digital asset industry. Platforms operating under a non-custodial model argue they should not be subject to the same stringent capital requirements or licensing as traditional custodians. Regulators continue to assess this distinction, aiming to balance consumer protection with supporting innovation in the rapidly evolving crypto market.
Custodial digital asset brokers must immediately update compliance frameworks to capture gross proceeds by January 1, 2025, formalizing the tax reporting architecture.
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