Client asset segregation is a regulatory requirement where financial institutions must keep client funds and assets separate from their own operational capital. This practice safeguards client holdings from the institution’s financial difficulties, such as bankruptcy or insolvency. It ensures that client assets are not used to satisfy the firm’s creditors. This measure is fundamental for investor protection and maintaining trust in financial services.
Context
In the digital asset space, client asset segregation is a pressing regulatory concern, particularly for cryptocurrency exchanges and custodians. Recent news highlights the lack of clear segregation rules in many jurisdictions, contributing to investor losses during platform failures. Ongoing discussions focus on establishing robust legal and technical frameworks to ensure digital asset segregation. A critical future development involves harmonizing these protections across global markets.
Institutional RIAs and Regulated Funds now possess a clear, conditional pathway to utilize state-chartered trust companies for compliant digital asset custody.
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