# Rules for Holding Client Assets, Quoted and Explained

> Client asset rules are the provisions that decide what happens in an insolvency. Four requirements and what each one does.

- Source: https://kzcryptorules.com/rules-for-holding-client-assets/
- Published: 2026-08-26
- Author: Dinara Yesimova
- Publication: KZ Crypto Rules — The requirement, then what it means
- Topic: custody
- Tags: custody, client-assets, obligations

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Where a framework imposes client asset rules, they are the most consequential provisions in it. They operate once and decide everything.

## Requirement one: segregation

Client assets must be held separately from the firm's own. In practice this means separate accounts or wallets, identified as client property in the firm's records.

The purpose is to make assets identifiable as belonging to clients rather than to the firm.

## Requirement two: no use without consent

The firm may not use client assets for its own account. Where any use is permitted it requires explicit, informed consent.

This is the provision whose absence preceded several international failures.

## Requirement three: reconciliation

Internal records must be reconciled against external holdings at a stated frequency, with differences investigated and resolved.

In plain terms: the firm must regularly check that what it says it holds is what it holds, and prove that it checked.

## Requirement four: records and reporting

Records sufficient to identify each client's entitlement at any time, and reporting to the supervisor on compliance.

## What these achieve together

That on insolvency, client assets can be identified and are not part of the estate available to general creditors.

Whether that outcome is actually reached depends on the law of the jurisdiction and on whether the rules were followed, which is why supervision matters alongside the rules.

## Where it is genuinely uncertain

How client asset rules written for traditional instruments apply to crypto assets, particularly where assets are pooled on-chain. Several jurisdictions are still working through this.

Anyone relying on the outcome for a significant amount should take specific advice rather than infer.

## What a customer can verify

Whether the platform is subject to such rules, what its terms say about title and segregation, and whether a supervisor enforces them.

## The practical test

Read the terms for the words title and segregated, then check the register for the permissions. Ten minutes.

[A licensed exchange under a named supervisor](https://collectnexchange.com/compliance/cysec-licensed) is subject to rules that exist independently of its own terms, which is the whole point. [Collect & Exchange](https://collectnexchange.com/services/crypto-custody) states both, and [venues that report what they are required to report](https://collectnexchange.com/) are reporting on exactly these obligations.

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This article explains how something works. It is not financial advice.
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