Why it matters
Omnibus custody is operationally simpler but legally riskier. When bitcoin is commingled, your ownership depends entirely on the custodian's records and solvency. In bankruptcy, omnibus holdings have historically been treated as general creditor claims rather than segregated client property.
How it works
The custodian maintains one or a few bitcoin addresses holding all client funds together. Client balances exist only in the custodian's database. Withdrawals are processed from the common pool. On-chain, there is no way to identify which bitcoin belongs to which client.
Example
An exchange holds 1,500 BTC across three addresses for 5,000 customers. The exchange's database tracks each customer's balance. When the exchange fails, customers discover they are unsecured creditors. The 1,500 BTC is divided among all creditors proportionally, not returned to original depositors.
Related terms
- Segregated custody
- Counterparty risk
- Full-reserve custody
- Proof of reserves
- Third-party custody
- Bitcoin custody provider
- Exitability
