Are my tokens segregated from the custodian's own assets?

They should be, whatever the account structure. A broker-dealer must keep customers' fully paid securities in its possession or control and separate from its own under Rule 15c3-3; an adviser's qualified custodian must hold client assets either in each client's own account or in accounts containing only clients' assets in the adviser's name as agent or trustee. For other providers, check the agreement: whether customer tokens are held as financial assets in securities accounts, and whether the provider may lend, pledge or rehypothecate them.

What is an omnibus wallet?

A blockchain address controlled by an intermediary that holds tokens for many customers at once. On-chain it shows one large balance; each customer's share is recorded only on the intermediary's internal books. The customer's claim is against the intermediary, usually as a security entitlement, not directly against the issuer.

What happens to omnibus assets if the intermediary fails?

Under UCC Article 8, financial assets an intermediary holds to satisfy its customers' entitlements are not its property and are not available to its general creditors; customers share them pro rata if there is a shortfall. For a SIPC member broker-dealer, SIPC also covers missing securities and cash up to $500,000 per customer, including $250,000 for cash. Outside those regimes, the agreement and local law decide.

Is segregated custody always safer?

It makes each holding visible and avoids sharing a shortfall with other customers, but it costs more and does not protect against the custodian's own errors or fraud in that account. Omnibus custody with accurate books, regular reconciliation and independent audits can be as safe in practice. The questions that matter more are segregation from the intermediary's own assets, the right to rehypothecate, and independent verification.

How can I tell which model a product uses?

Read the custody section of the offering documents or customer agreement for whose name the account or wallet is in, whether assets are commingled with other customers' or the provider's, and whether the provider may use them. On-chain, a single address holding a large share of supply for a platform's customers is usually an omnibus wallet.

Omnibus vs Segregated Custody

Custody & Settlement

Definition

In segregated custody, each customer's assets are held in an account, or on a blockchain in a wallet, that belongs to that customer alone, so the custodian's records and the on-chain balance both show that customer's holding directly. In omnibus custody, many customers' assets are pooled in one account or wallet held in the intermediary's name, and each customer's share exists only on the intermediary's books. Both are lawful and common: most US brokerage holdings are omnibus, held in street name through the Depository Trust Company. Two separate questions decide how safe either arrangement is. The first is whether customer assets are kept apart from the intermediary's own assets (segregation from proprietary assets), which rules for broker-dealers and advisers require in either model. The second is whether the intermediary's books are accurate and fully backed, because in an omnibus account a shortfall is shared among customers.

Why it matters

Custody failures rarely come from the account structure itself; they come from customer assets being mixed with the firm's own, lent out, or recorded wrongly. Omnibus structures make those failures harder to see from outside, because one wallet or account holds everyone's assets and only the firm's books say who owns what. Tokenization adds a twist: a public chain shows the omnibus balance to anyone, which can reassure, but it cannot show whether that balance covers every customer's claim or whether the firm owes some of it elsewhere. Wrapped tokens and token programs that hold underlying shares are usually omnibus at the asset level, with a single account holding shares for every token holder. For those products, the protection lies in how the pooled assets are legally separated from the issuer's estate, who supervises them, and how often holdings are reconciled against tokens outstanding.

Common misconceptions

•Omnibus does not mean commingled with the firm's own assets. Customer assets can be pooled with each other and still be segregated from the firm's.
•A visible on-chain balance is not proof of full backing. It shows what the wallet holds, not what the firm owes its customers.
•Segregated accounts are not immune to loss. They remove shared-shortfall risk, not the risk of custodian error or fraud.
•In an omnibus account you usually do not own specific units. You own a pro rata entitlement against the intermediary.
•A legal separation still under construction is not a separation. Read whether the segregated structure is in place for the specific product.

Technical details

What the rules require

Investment advisers (Rule 206(4)-2): a qualified custodian holds client assets in a separate account for each client in the client's name, or in accounts containing only clients' assets in the adviser's name as agent or trustee.

Broker-dealers (Rule 15c3-3): possession or control of customers' fully paid and excess margin securities, free of liens and separate from proprietary positions, plus a reserve account for customer cash.

Foreign institutions acting as qualified custodians: must keep advisory clients' assets in customer accounts segregated from proprietary assets.

Non-security crypto assets at a broker-dealer: staff suggest agreeing with customers to treat them as financial assets in securities accounts under UCC Article 8, to keep them out of the firm's estate.

Insolvency of the intermediary

UCC 8-503: financial assets held by a securities intermediary, to the extent needed to satisfy its customers' entitlements, are held for the customers, are not its property and are not subject to its creditors' claims.

Shortfall: customers share the intermediary's interest in each financial asset pro rata.

SIPA: for a SIPC member broker-dealer, protection up to $500,000 per customer including $250,000 for cash, for securities as SIPA defines them.

Outside these regimes: the customer agreement, trust arrangements and local law decide, and customers may rank as unsecured creditors.

Examples from AltStreet's reviews

Dinari (non-US dShares): underlying shares held in an account in Dinari's name for the benefit of the token program, not subject to security interests or setoff other than customary fees, in a Bermuda registered segregated accounts company with an independent representative to run a claims process if Dinari stops operating.

Dinari USD+: the same document said Dinari was 'working to create a segregated account' for those assets, which reads as unfinished for that product.

Backed: underlying securities held 1:1 with regulated custodians asset by asset with no commingling, as Backed describes it; the holder owns a debt claim on the issuer backed by those shares.

Broker-dealer model: tZERO's digital asset securities broker-dealer controls the wallets and keys for customers under the special purpose broker-dealer conditions.

Checklist

Whose name the account or wallet is in, and whether it holds only customer assets.

Whether the provider may lend, pledge or rehypothecate customer assets.

How often holdings are reconciled to customer records, and whether an independent party verifies it.

Which insolvency regime applies: SIPA, UCC Article 8 by agreement, a trust or segregated accounts structure, or none.

For token programs, whether the separation is in place for the specific product, not only described as planned.

How investors apply the term

Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.

The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.

Frequently asked questions

Are my tokens segregated from the custodian's own assets?: They should be, whatever the account structure. A broker-dealer must keep customers' fully paid securities in its possession or control and separate from its own under Rule 15c3-3; an adviser's qualified custodian must hold client assets either in each client's own account or in accounts containing only clients' assets in the adviser's name as agent or trustee. For other providers, check the agreement: whether customer tokens are held as financial assets in securities accounts, and whether the provider may lend, pledge or rehypothecate them.
What is an omnibus wallet?: A blockchain address controlled by an intermediary that holds tokens for many customers at once. On-chain it shows one large balance; each customer's share is recorded only on the intermediary's internal books. The customer's claim is against the intermediary, usually as a security entitlement, not directly against the issuer.
What happens to omnibus assets if the intermediary fails?: Under UCC Article 8, financial assets an intermediary holds to satisfy its customers' entitlements are not its property and are not available to its general creditors; customers share them pro rata if there is a shortfall. For a SIPC member broker-dealer, SIPC also covers missing securities and cash up to $500,000 per customer, including $250,000 for cash. Outside those regimes, the agreement and local law decide.
Is segregated custody always safer?: It makes each holding visible and avoids sharing a shortfall with other customers, but it costs more and does not protect against the custodian's own errors or fraud in that account. Omnibus custody with accurate books, regular reconciliation and independent audits can be as safe in practice. The questions that matter more are segregation from the intermediary's own assets, the right to rehypothecate, and independent verification.
How can I tell which model a product uses?: Read the custody section of the offering documents or customer agreement for whose name the account or wallet is in, whether assets are commingled with other customers' or the provider's, and whether the provider may use them. On-chain, a single address holding a large share of supply for a platform's customers is usually an omnibus wallet.