How Does ‘Rehypothecation’ Apply to Prime Broker Custody of Digital Assets?

Rehypothecation is the practice where a prime broker reuses a client's posted collateral (assets) for their own purposes, such as lending it out. In the digital asset space, this is highly controversial and often restricted, as it introduces additional counterparty risk and complicates the segregation of client assets.

Reputable digital asset prime brokers often explicitly state they do not rehypothecate client crypto assets.