Client Money Protection

Definition ∞ Client Money Protection refers to regulatory measures designed to safeguard funds held by financial service providers on behalf of their customers. These rules mandate that client assets are segregated from the firm’s operational capital, preventing their use for company liabilities. The aim is to ensure clients can recover their funds even if the financial institution experiences insolvency. This mechanism provides a critical layer of security for consumer deposits.
Context ∞ In cryptocurrency news, client money protection is a frequently discussed topic, particularly following incidents involving exchange collapses or security breaches where user funds were compromised. Regulators worldwide are increasingly examining how traditional client money protection principles can be applied to digital asset platforms. A key debate centers on whether existing frameworks adequately cover the unique characteristics of crypto assets and decentralized finance.