Rehypothecation Ban

Definition ∞ A rehypothecation ban is a regulatory prohibition that prevents financial institutions from re-using client assets, such as collateral, for their own investment or lending activities. This measure aims to protect client funds by ensuring that assets held in custody cannot be pledged multiple times. It reduces systemic risk and the potential for loss in the event of institutional failure.
Context ∞ The concept of a rehypothecation ban is highly relevant in discussions surrounding digital asset custody and regulation, particularly after high-profile bankruptcies in the crypto industry where client assets were commingled or misused. Implementing such bans in the digital asset space seeks to enhance investor protection and promote greater transparency regarding asset segregation. News often covers regulatory proposals and debates concerning asset handling practices for crypto custodians.