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Escrow


Assets held in escrow are temporarily managed by a third party in order to facilitate a transaction between two other parties. The purpose of an escrow is to provide assurance that both parties will receive the asset that they are owed. The agent managing the escrow ensures that one party does not default on delivery of an asset that they owe the other party, significantly reducing counterparty risk

An escrow is usually held by a reputable agent with a very safe balance sheet. This decreases their risk of insolvency, which would be extremely problematic for somebody who is allowing them to manage their assets. The escrow agent will usually take a fee for their services, which may be paid by one or both of the parties involved in the transaction.