Definition ∞ Crypto custody segregation involves separating a client’s digital assets from the custodian’s own assets and from other clients’ assets. This practice ensures that client holdings are identifiable and protected, even if the custodial institution faces insolvency or operational issues. It is a fundamental security and consumer protection measure in digital asset management.
Context ∞ Reports on crypto custody frequently highlight the importance of segregation, especially following events where client funds were commingled or mishandled. Regulatory bodies globally are increasingly mandating strict custody segregation rules for licensed digital asset service providers. This development aims to bolster investor confidence and reduce systemic risk within the digital asset ecosystem.
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