The development of digital technology has led to the emergence of various forms of digital assets such as cryptocurrencies, digital tokens, and Non-Fungible Tokens (NFTs), which possess economic value and have begun to be utilized in modern financing activities. This development raises legal issues regarding the legal status of digital assets as collateral objects and the implementation of legal due diligence by banks in assessing the ownership, custody, and encumbrance of digital asset collateral. This study aims to analyze the legal position of digital assets as collateral objects within the Indonesian legal system and to examine the implementation of legal due diligence as a prudential banking standard in assessing digital assets used as collateral. This research employs a normative legal research method using statutory and conceptual approaches. The legal materials used consist of primary legal materials in the form of laws and regulations related to banking law, security law, and digital asset regulations, as well as secondary legal materials comprising books, scientific journals, and other legal literature. The results of this study indicate that digital assets may generally be classified as intangible movable property possessing economic value and potentially eligible to serve as collateral objects under the Indonesian law of property and fiduciary security law. However, the absence of specific regulations concerning digital collateral has resulted in legal uncertainty regarding the mechanisms for the encumbrance, registration, and execution of digital asset collateral. Furthermore, the implementation of legal due diligence concerning digital assets requires a more comprehensive assessment standard, including verification of legal ownership, examination of custody mechanisms, application of Know Your Customer (KYC) and Anti-Money Laundering (AML) principles, as well as cybersecurity risk analysis. Therefore, specific regulations concerning digital collateral and legal due diligence standards are necessary in order to provide legal certainty and legal protection for banking institutions within Indonesia’s digital financing system.