Definition ∞ Deposit insurance is a system designed to protect depositors’ funds held in banks and other financial institutions against losses in the event of institutional failure. This protection typically covers a specific amount per depositor, ensuring public confidence in the banking system. It functions as a safety net, mitigating the risk of bank runs and preserving financial stability. The scheme offers a measure of security for individual and corporate savings.
Context ∞ The relevance of deposit insurance to digital assets is a significant and evolving area of discussion, as most cryptocurrencies and stablecoins are not currently covered by traditional schemes. Debates persist regarding whether and how such protection could extend to certain digital asset holdings, particularly those held by regulated financial entities. A critical future development involves legislative and regulatory efforts to address the insurance status of digital asset deposits. News often highlights policy proposals and discussions about consumer protection in the digital asset market.
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