Safeguarding Client Crypto-Assets and Funds Under MiCA

The safeguarding duty every CASP carries

There is a quiet assumption that does real damage. A firm decides it is “an exchange, not a custodian,” or “a broker, not a custodian,” and concludes that the rules about protecting client assets belong to somebody else. It then designs its wallets and accounts without those rules in mind.

MiCA does not let that assumption stand. The client-asset safeguarding rule — the obligation to safeguard clients’ crypto-assets and funds — is not switched on by calling yourself a custodian. It is switched on by holding clients’ crypto-assets or funds. Most CASPs do exactly that, somewhere in their model, and the client-asset safeguarding rule reaches all of them.

What the safeguarding duty requires

The client-asset safeguarding rule sets a safeguarding duty for any CASP that holds client crypto-assets or funds. Its core demands:

• Safeguard clients’ ownership rights — and do so specifically against the risk of the CASP’s own insolvency
• Segregate clients’ crypto-assets and funds from the CASP’s own holdings
• Do not use clients’ crypto-assets or funds for the CASP’s own account
• Hold and place client funds so that they are protected and identifiable

The throughline is simple: client assets belong to the client, in normal operation and — the part that gets skipped — when the firm fails. The client-asset safeguarding rule is written so that a CASP’s collapse does not become its clients’ loss.

Segregation: client assets are not the firm’s

Segregation is the operational heart of the rule. Clients’ crypto-assets and funds must be kept separate from the CASP’s own. Not labelled separately in a spreadsheet while sitting in the same place — actually separate.

For crypto-assets, that means client holdings are not commingled with the firm’s proprietary holdings. For funds, it means client money is not pooled into the firm’s operating accounts. The test that matters is identification: if a regulator, an administrator, or a client asked “which of these assets are the clients’?”, the answer has to be clean and immediate. A structure where that question is hard to answer is a structure that fails the client-asset safeguarding rule — and fails it precisely when the answer is needed most.

Client funds get bank or central-bank protection

MiCA treats client funds — money, as opposed to crypto-assets — with particular care. Funds that are not e-money tokens have to be placed, promptly, with a central bank or a credit institution, under arrangements that keep them protected and stop them being used for the CASP’s own account.

The logic is the same one that governs client money across regulated finance: a CASP is not a safe place to leave pooled client cash on its own balance sheet, so the cash is moved to an institution that is. A firm that holds client funds loosely, or treats the float as a convenient source of liquidity, is on the wrong side of this requirement.

How this differs from the custody rules

It is worth being precise, because two MiCA provisions are easy to blur.

The custody-service rulebook governs the custody and administration of crypto-assets on behalf of clients — the custody service. It is one of the crypto-asset services a CASP can be authorised for, and it has its own operational rulebook: a custody policy, a register of positions, liability for losses.

The client-asset safeguarding rule is broader. It is the cross-cutting safeguarding duty that applies to any CASP holding client crypto-assets or funds, whatever services it offers. A firm authorised for the custody service is subject to both. A firm that never offers custody — an exchange, a broker — is still subject to The client-asset safeguarding rule the moment it holds a client balance.

	The client-asset safeguarding rule	The custody-service rulebook
Scope	Any CASP holding client crypto-assets or funds	The custody service specifically
Nature	Cross-cutting safeguarding duty	Operational rulebook for one service
Triggered by	Holding client assets or funds	Being authorised to provide custody

What a clean safeguarding posture looks like

A CASP file that holds up on client-asset protection shows:

1. A clear answer to whether the firm holds client crypto-assets or funds — and if it does, that The client-asset safeguarding rule has been applied, not assumed away
2. Segregation in fact — client holdings demonstrably separate from proprietary holdings, in wallets and in accounts
3. Client funds placed with a central bank or credit institution, promptly, under protective arrangements
4. A documented position that client assets are not used for the firm’s own account — and a business model that does not quietly rely on them
5. Arrangements tested against the insolvency scenario, not only normal operation

Working with counsel on client-asset safeguarding

The diagnostic for counsel: ask them to confirm, in writing, whether the firm holds client crypto-assets or funds — and if so, to walk through the client-asset safeguarding rule segregation, the own-account prohibition, and the insolvency test, regardless of whether custody is a listed service. Counsel that waves off safeguarding because “the firm isn’t a custodian” has misread the trigger. For the custody service itself, see crypto custody under MiCA; for the wider rulebook, the crypto licensing pillar guide. The firms in our index with relevant client-asset experience are listed below.