Definition ∞ Client assets segregation is the practice of holding customer funds and digital assets separately from a firm’s operational capital. This measure protects user holdings from being co-mingled with company assets, which is crucial during insolvency events. It ensures that if a crypto exchange or custodian experiences financial distress, client funds remain distinct and are not subject to claims by the firm’s creditors. This principle enhances security and trust within the digital asset custody landscape.
Context ∞ Regulatory bodies globally increasingly emphasize client assets segregation as a critical requirement for digital asset service providers. Recent news often highlights cases where a lack of proper segregation led to significant customer losses during platform failures. The discussion involves establishing clear legal frameworks and auditing standards to enforce this separation effectively. Future developments will likely see stricter enforcement and technological solutions that provide verifiable proof of asset segregation on-chain.
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