Asset Segregation

Definition

Asset segregation means keeping clients' crypto assets separate — legally and operationally — from the custodian's own balance sheet. It is the difference between your Bitcoin being identifiably yours and being a mere accounting entry mixed in with the company's funds. When properly executed, it ensures that, if the custodian goes bankrupt, the client's assets do not enter the bankruptcy estate and are not used to pay the custodian's creditors.

The lesson was left by the collapses of platforms that commingled client funds with their own or those of affiliated entities: when insolvency arrived, users became just another creditor in line, with their Bitcoin trapped in the proceedings. Segregation breaks that link: the assets sit in separate accounts or addresses, identified as the client's property, and do not appear on the provider's balance sheet.

That is why segregation is now an explicit regulatory requirement. In Europe, the MiCA regulation requires crypto-asset service providers (CASPs) to segregate client assets from their own and makes them liable for their loss. In the United States, the qualified custodians used by funds and spot ETFs must also keep client assets segregated and beyond the reach of their creditors. Together with proof of reserves and insurance, it is one of the central guarantees that distinguish a serious institutional custodian.

In Context