What is Rehypothecation?

Rehypothecation is a process that occurs when banks, brokers, exchanges, and other financial service providers use client assets for their own purposes to benefit both sides. For example, several blockchain enterprises use a portion of their clients' cryptocurrency holdings as collateral to be lent to institutional investors. In exchange, users receive incentivized rewards for holding their assets on the platform. Companies in the blockchain industry that make use of this process include Binance, Huobi, Crypto.com, Celsius Network, and BlockFi.