Client Assets

Client assets represent crypto or fiat funds belonging to customers, entrusted to a CASP, exchange, or custodian for safekeeping, trading, or other services, subject to strict regulatory protections ensuring preservation of ownership rights and preventing unauthorized use.

MiCA and UK FCA proposals require safekeeping on trust or custodial basis, regular reconciliation and disclosures on holdings, and designation of a CASS Operational Officer for oversight. EU Article 70 MiCA mandates CASPs to make adequate safekeeping arrangements to preserve ownership rights and prevent asset use without client consent.

Client asset protection frameworks require firms to maintain accurate records of client holdings, conduct daily reconciliation between client entitlements and assets held, obtain client consent before using assets for any purpose including lending or staking, and implement governance controls preventing commingling with firm's proprietary assets. Enhanced protection standards apply to retail client assets compared to professional clients. Failures in client asset protection have been central to major crypto exchange collapses including FTX, where client funds were misappropriated for proprietary trading and lending, highlighting the critical importance of robust segregation and safekeeping arrangements.