Funds held in the company's name do not necessarily constitute company revenue.
Suppose a platform collects payments on behalf of one hundred merchants, deducts fees and then pays out. The amounts owed to merchants generally cannot all be classified as freely usable operating revenue merely because they first entered the platform's account. The ownership of funds and payment obligations should be determined under the contracts and applicable law. By contrast, software service fees already earned and collected by the company may constitute its own funds, but the bank should still know the true business source, and this distinction cannot be used to conceal collection and payment on behalf of others.
Different regimes provide for different forms of safeguarding funds
The current FCA guidance in the United Kingdom requires payment and e-money institutions within scope to safeguard relevant client funds, which may be achieved through statutory segregation or qualifying insurance, guarantees and similar arrangements, together with record-keeping and reconciliation requirements. It therefore cannot be said broadly that the whole world must use the same type of trust account, nor can opening another ordinary account be regarded as completing safeguarding. The institution holding the funds, account confirmation and the legal effects in insolvency should all be verified under the applicable regime.
Mainland payment reserve funds cannot be converted to crypto settlement
China's Regulations on the Supervision and Administration of Non-bank Payment Institutions require reserve funds to be deposited in accordance with the rules and prohibit misappropriation, occupation, borrowing or use as security; a 2026 notice further restricts supporting settlement involving virtual currencies. Reserve fund arrangements under a mainland payment licence are not a lawful channel for receiving and paying RMB for stablecoin business. Naming an account a "client segregated account" cannot alter the prohibitive boundary.
Use reconciliation and stress testing to detect commingling
It is advisable to reconcile client ledgers, bank balances and funds in transit daily or at the applicable statutory frequency, and to record separately earned fees, refunds, security deposits and amounts pending settlement. Then test the following assumption: if the bank freezes the platform's own funds, can client funds be clearly identified and returned in accordance with law? If this can only be explained by the platform's internal Excel, without account and contractual safeguards, the risk remains. Before launch, withdrawal authority, bank set-off clauses and mechanisms to cover funding shortfalls should all be reviewed together.
Recommended actions
- Define and segregate, by category, own revenue, client funds pending payment, refunds and security deposits.
- Obtain the bank's confirmation of the account's purpose and the necessary fund safeguarding arrangements.
- Establish internal and external reconciliation and discrepancy escalation procedures, with dedicated review of the effects of freezing, set-off and insolvency.
Information note: This article provides general information and does not replace legal advice based on specific facts.
References
- Safeguarding requirements for payment institutions and electronic money institutions — UK Financial Conduct Authority (FCA)
- Regulations on the Supervision and Administration of Non-Bank Payment Institutions — State Council / State Administration for Market Regulation
- Notice on Further Preventing and Handling Risks Associated with Virtual Currency and Related Matters (Yin Fa [2026] No. 42) — People's Bank of China and seven other departments
