Custody and security: How SpaceX xStock tokens are held and verified
SPCXx is backed 1:1 by real SpaceX shares held in regulated custody. This article covers the operational details of that arrangement: where the shares sit, who oversees them, how the backing is verified and what the structure is designed to do if something goes wrong.If you want to start with the basics, the companion article on how SpaceX xStock tokens are structured explains what 1:1 backing means in practice.
Key Takeaways:
Underlying SpaceX shares are held by Alpaca Securities LLC (FINRA-regulated, SIPC member) in segregated sub-accounts. Incore Bank serves as backup custodian.
A three-party Account Control Agreement gives an independent Security Agent the power to take control of custody accounts if token holder rights are not being upheld.
The structure is designed so token holder claims are linked to underlying asset value in custody, not treated as unsecured claims against the issuer. Actual outcomes depend on product terms and legal proceedings.
Where are the shares held?
The SpaceX shares backing SPCXx tokens are held by Alpaca Securities LLC, a US broker-dealer regulated by FINRA and a member of SIPC.A few things to understand about this setup:
Alpaca is a regulated institution. FINRA regulation means Alpaca operates under defined compliance and operational standards. SIPC membership relates to Alpaca's regulated brokerage activities, though it does not specifically cover SPCXx token holders against token losses, market losses or issuer failure.
Incore Bank serves as backup custodian. If the primary custody arrangement is disrupted, Incore Bank provides a secondary layer of custodial continuity.
Accounts are segregated. Each xStocks product has its own dedicated sub-account with no commingling between products. The shares backing SPCXx are held separately from those backing any other token. This helps prevent issues with one product from affecting another product’s custody pool.
Who is watching the custodian?
Custody alone is not enough. Someone needs to verify that the custodian is doing its job and that the shares remain where they should be. This is where the Account Control Agreement (ACA) comes in.The ACA is a three-party contract between:
Backed Assets (JE) Limited (the issuer of SPCXx tokens)
Alpaca Securities LLC (the custodian holding the shares)
An independent Security Agent (a third party with oversight powers)The Security Agent has visibility over all collateral accounts. Its job is to monitor whether token holder rights, as defined in the approved product prospectus, are being upheld. If it determines those rights are being violated, it has the contractual authority to take control of the custody accounts, independently of the issuer.This is significant because it means oversight does not depend on the issuer policing itself. There is an independent party with the power to intervene if things go wrong.
How is the 1:1 backing verified?
Two mechanisms provide verification:
Quarterly ISAE 3000 audits. An independent auditor checks whether each on-chain SPCXx token has a corresponding real share held in custody. This is done asset-by-asset with no netting across products. The ISAE 3000 standard is an internationally recognized assurance framework, so this is not a self-reported claim from the issuer.
Live proof of reserves. Between quarterly audits, proof of reserves is published via the xStocks Dashboard. This is publicly accessible, giving users a way to review whether on-chain supply matches custodied shares at any point.Together, these mechanisms provide both periodic formal verification (audits) and ongoing informal transparency (proof of reserves).
What happens if the issuer fails?
The custody arrangement uses an SPV structure designed with bankruptcy isolation in mind. The aim is straightforward: if Backed Assets (JE) Limited faced financial distress, token holder claims should be linked to the underlying asset value held in custody, rather than leaving token holders as general unsecured creditors competing with all of the issuer's other obligations.
The Security Agent provides an additional enforcement mechanism in this scenario. It can take control of the custody accounts independently, meaning the shares do not necessarily become entangled in the issuer's insolvency proceedings.
However, there is an important caveat: structural design and actual legal outcomes are not the same thing. The protections described above represent how the arrangement is built, but actual recovery in a real failure scenario would depend on the specific circumstances, the full product terms and applicable legal proceedings in the relevant jurisdiction. The structure does not guarantee recovery.
What the custody structure does not give you
Understanding boundaries is as important as understanding protections:
You hold economic exposure, not direct shares. SPCXx does not give you voting rights, shareholder registration or shareholder-style dividends. If dividends or other corporate actions apply, their value is reflected through the product mechanism, such as reinvestment, rebasing or token airdrops.
Token prices can diverge from underlying share value. Market dynamics, liquidity conditions and trading activity can cause SPCXx to trade at a premium or discount to the underlying.
The structure depends on multiple parties. Alpaca Securities, Backed Assets and the Security Agent all need to continue operating as designed for the protections to function.
Legal enforceability may vary by jurisdiction. Users in different regions may face different legal landscapes in the event of a dispute or distress scenario.
This is not the same as a personal brokerage account. Holding SPCXx is structurally different from holding SpaceX shares directly through a traditional broker.
The bottom line
SPCXx is supported by a custody structure that includes a FINRA-regulated custodian, segregated accounts, a backup custodian, quarterly ISAE 3000 audits, live proof of reserves and an independent Security Agent under a three-party Account Control Agreement.
These layers are designed to support oversight, verification and enforcement within the xStocks structure. They are meaningful, but they are not a guarantee of safety or recovery. Users receive economic exposure, not direct share ownership, and outcomes in stress scenarios depend on the product terms, applicable law and continued operation of the parties involved.
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