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  "domain": "agent-economy",
  "title": "Embedded-wallet custody bankruptcy mechanics · what happens to end-user funds if Privy / Stripe / Coinbase CDP / AWS Bedrock fails",
  "entry_type": "wiki_entry",
  "frontmatter": {
    "title": "Embedded-wallet custody bankruptcy mechanics · what happens to end-user funds if Privy / Stripe / Coinbase CDP / AWS Bedrock fails",
    "aliases": [
      "embedded wallet custody bankruptcy mechanics",
      "embedded wallet provider failure end-user funds",
      "MPC key reconstruction custody bankruptcy",
      "Stripe Treasury custody chain",
      "SIPC FDIC pass-through analog embedded wallet",
      "Privy bankruptcy MPC shard recovery",
      "Coinbase CDP failure user wallet survival",
      "AWS Bedrock TEE failure wallet impact"
    ],
    "domain": "agent-economy",
    "type": null,
    "created": "2026-05-25",
    "last_updated": "2026-07-29",
    "last_tended": "2026-07-29",
    "review_by": "2026-10-27",
    "confidence": "likely",
    "tags": [
      "agent-economy",
      "embedded-wallet",
      "custody",
      "bankruptcy",
      "mpc",
      "tee",
      "key-reconstruction",
      "social-recovery",
      "multisig",
      "sipc",
      "fdic",
      "stripe-treasury",
      "regulatory-protection"
    ],
    "status": "active",
    "canonical_anchor": null,
    "related": [],
    "note": null,
    "sources": [
      "https://docs.privy.io/security",
      "https://docs.cdp.coinbase.com/get-started/security",
      "https://magic.link/docs/wallets/security",
      "https://stripe.com/treasury",
      "https://www.fdic.gov/",
      "https://www.sipc.org/",
      "https://www.sec.gov/divisions/marketreg/sipc-protection.htm",
      "https://www.sec.gov/news/statement/staff-statement-on-sab-121",
      "https://www.fca.org.uk/firms/cryptoassets",
      "https://www.fsa.go.jp/en/news/2023/20230630/01.pdf",
      "https://www.fsa.go.jp/en/policy/payments/index.html",
      "https://www.mas.gov.sg/regulation/payments",
      "https://www.uncitral.org/",
      "https://www.ssrn.com/"
    ]
  },
  "summary": "End-user funds in an embedded wallet are on-chain at an address the user controls jointly with the provider, not on the provider's balance sheet. If Privy, Stripe (the Privy parent), Coinbase CDP, or the underlying AWS Bedrock TEE infrastructure fails, the legal-bankruptcy claim on the cash a user m",
  "headings": [
    "Embedded-wallet custody bankruptcy mechanics · what happens to end-user funds if Privy / Stripe / Coinbase CDP / AWS Bedrock fails",
    "TL;DR",
    "Wiki route",
    "Four failure scenarios",
    "MPC sharding · the structural protection",
    "Social-recovery + Passkey on-device shards",
    "Multisig escape hatches for institutional users",
    "Stripe Treasury · the fiat-side custody chain",
    "SIPC / FDIC pass-through analog · the regulatory question",
    "What actually happens in each scenario · step-by-step"
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