Definition ∞ Segregation of assets is the practice of separating customer funds and assets from a firm’s operational capital and proprietary holdings. This fundamental principle of financial regulation protects client assets from being commingled or used to cover a firm’s liabilities in case of insolvency. In the digital asset industry, it ensures that client cryptocurrencies are held distinctly from an exchange’s or custodian’s own funds. This practice is vital for investor protection and maintaining trust in financial intermediaries.
Context ∞ Segregation of assets is a critical regulatory requirement that has gained heightened attention in the digital asset space, especially after high-profile platform failures. Debates often focus on how this principle applies to decentralized protocols and the varying standards across jurisdictions. News frequently reports on regulatory proposals mandating stricter asset segregation rules for crypto exchanges and custodians, aiming to enhance user security.
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