What is segregated accounts?

Holding customer money or crypto in accounts kept apart from the company's own funds so the two cannot be mixed.

Segregation is a licensing condition in many jurisdictions and matters most in insolvency, when commingled assets fall into the estate. It is a legal arrangement rather than proof the assets exist.

The word appears in exchange marketing constantly and means several different things. Sometimes it means client assets are held by a separate legal entity under a trust arrangement. Sometimes it means a different bank account at the same institution. Sometimes it means an internal ledger column. Only the first reliably survives the company failing.

How it works

1. Client assets are identified as client property, not as an asset of the firm, usually through a trust or an equivalent legal structure.
2. They are held separately in fact, whether in a distinct bank account, at a third-party custodian, or in wallets designated for client holdings.
3. The firm cannot use them. No lending, no posting as collateral, no funding of the firm's own positions. See rehypothecation.
4. Reconciliation is performed regularly, comparing what is held against what is owed to clients, often with an external check.

The reason this matters is what happens in insolvency. Properly segregated client assets are generally outside the failed firm's estate, so clients are not queuing behind other creditors for their own property. Commingled assets are part of the estate, and clients become unsecured creditors, which historically has meant partial recovery after years.

Fiat and crypto are often treated differently at the same venue. Customer currency may sit in a regulated arrangement while coins are pooled in the exchange's own wallets, and the terms of service are where that distinction is stated, if it is stated at all.

Example

Two illustrative failures with the same headline balance. In both, a customer holds $20,000 on a platform that collapses.

Where assets were segregated and held in trust at a third-party custodian, the administrator identifies the client property and returns it, subject to costs and delay. The customer's claim is to a specific pool rather than to the company.

Where assets were pooled with the firm's own and partly lent out, the customer joins the unsecured creditor queue behind secured lenders. Recovery is a percentage decided years later. The balance shown on the dashboard was identical in both cases, and the legal position behind it was not.

Why it matters when you buy

Whether the balance you leave on an exchange is your property or a claim against a company is decided by the terms of service, not by the interface. It is worth reading that section once for any venue you keep money on. The exchange directory records what venues disclose, and protecting yourself from an exchange collapse covers the rest.

Related terms

custodian — who holds the assets; rehypothecation — the reuse segregation prevents; proof of reserves — evidence assets exist; qualified custodian — the regulated custody standard; counterparty risk — what remains without it; self custody — removing the intermediary entirely.

Questions

How do I find out whether an exchange segregates?

Read the terms of service and any published custody policy. Look for a trust arrangement, a named third-party custodian, and an explicit statement that client assets are not used by the firm. Silence usually means pooling.

Does segregation mean my funds are guaranteed?

No. It improves your position in an insolvency by keeping assets out of the estate, and it does nothing about theft, operational failure, or assets that were never there. It is one protection among several.

Are fiat and crypto treated the same?

Often not. Customer currency may sit under a regulated arrangement while coins are pooled in exchange wallets, so check what each asset type is subject to rather than assuming one policy covers both.