Segregated Assets

Definition ∞ Segregated assets are client funds or holdings kept separate from a firm’s operational capital. This practice ensures that client assets are not commingled with the company’s own funds, providing protection in the event of the firm’s insolvency or bankruptcy. For digital asset custodians and exchanges, asset segregation is a critical security and trust mechanism. It prevents unauthorized use of client holdings and helps maintain accountability.
Context ∞ Segregated assets are a significant concern in crypto news, especially following high-profile collapses of centralized digital asset platforms where client funds were reportedly misused. Regulators are increasingly mandating strict asset segregation rules for exchanges and custodians to enhance investor protection. The implementation of verifiable on-chain segregation mechanisms is a key area of development for improving transparency and trust in the digital asset custody landscape.