I think you are referring to SWAP.BTC which I am not sure whether it is kept in a wallet similar to how a centralised exchange keeps BTC for its customers or it is built into the second layer and is created for each user as their own quasi wallet. I have not really asked how it works or gone to ask the developers of the second layer.

Is it decentralised? I am not good with code so cannot for the life of me be 100% or even 10% sure how it all works. But I am thinking what you as saying is already within hive engine.