learn / What is bankruptcy-remote custody (and why it matters for RWAs)
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What is bankruptcy-remote custody (and why it matters for RWAs)
Bankruptcy-remote custody means the real assets backing a token are legally isolated from the issuer — typically in a separate trust or SPV — so if the issuer goes bankrupt, token holders still have a claim on the reserves and they are not pooled with the issuer's creditors.
Why it matters
If reserves sit on the issuer's own balance sheet and the issuer fails, token holders can become unsecured creditors and lose their claim. Bankruptcy-remote structures — a trust, an orphan SPV, or segregated custody — keep the backing legally separate so it survives issuer insolvency.
How it's achieved
Common structures include a declaration of trust with an independent trustee, a bankruptcy-remote special-purpose vehicle that owns the assets, and segregated, non-rehypothecated custody at a regulated custodian. A true-sale or non-consolidation legal opinion strengthens the protection.
How to check it
Look for an explicit statement of segregation and bankruptcy-remoteness, the legal entity and jurisdiction, an independent trustee or custodian, and ideally a legal opinion. Vague language like “held securely” without a named structure is a weaker signal — reflected in the custody pillar of a token's Claridex score.
FAQ
Is bankruptcy-remote the same as insured?
No. Insurance covers loss or theft of the assets; bankruptcy-remoteness covers what happens to holders' claim if the issuer becomes insolvent. Strong custody has both.
How can I tell if a token is bankruptcy-remote?
Check the issuer's legal documentation for a named trust or SPV, an independent trustee, segregated custody, and ideally a non-consolidation or true-sale opinion.