Digital Asset Segregation

Definition ∞ Digital asset segregation is the practice of keeping client digital assets separate from the assets of the custodial institution or service provider. It ensures that client holdings are not commingled with operational funds, offering a layer of protection in cases of insolvency or mismanagement by the custodian. Digital asset segregation is a fundamental principle of sound financial practice, designed to safeguard client interests. This separation enhances trust and reduces counterparty risk within the digital asset ecosystem.
Context ∞ Digital asset segregation is a key concern for regulators and investors, particularly in light of past platform failures where client assets were compromised. News often highlights debates surrounding the technical and legal implementation of effective segregation for various digital asset types. The establishment of robust and verifiable segregation practices is considered essential for increasing institutional confidence and promoting the long-term stability of digital asset markets.