Rehypothecation
Plain definition. Rehypothecation is when a financial firm, such as a broker-dealer, uses assets that belong to its clients, as the Financial Stability Board defined it on January 25, 2017.
Technical definition. In its January 25, 2017 report, the Financial Stability Board defines re-hypothecation narrowly as “any use of client assets by a financial intermediary” such as a broker-dealer. It sets this apart from collateral re-use, which is not limited to client assets and covers “any use of assets delivered as collateral in a transaction by an intermediary or collateral taker”. Both practices make collateral more available and cheaper to use, which lowers transaction and liquidity costs, but the report warns that they may also stop clients from promptly reaching their securities if an intermediary becomes insolvent, add to a build-up of leverage, and increase interconnectedness among market participants.
On this site
On this site, Rehypothecation comes up in Is an XRP liquidity multiplier just leverage? and What happened to XRP held with crypto lenders that collapsed in 2022?.
Source
Re-hypothecation and collateral re-use: Potential financial stability issues, market evolution and regulatory approaches (fsb.org), read October 1, 2026.