Financial resolution refers to the process of managing and resolving the failure of a financial institution, such as a bank or a major investment firm, in an orderly manner. This aims to minimize disruption to the broader financial system, protect depositors and investors, and preserve financial stability. It often involves regulatory intervention, asset restructuring, or the transfer of operations to another entity. Effective resolution mechanisms are vital for systemic risk mitigation.
Context
The concept of financial resolution is gaining prominence in the digital asset space as regulatory bodies consider frameworks for addressing the failure of cryptocurrency exchanges, lending platforms, and other digital asset service providers. Discussions focus on how traditional resolution tools can adapt to decentralized structures and the challenges of asset segregation and investor protection in this nascent industry. Preventing contagion across the digital economy is a key objective.
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