Financial Safety Net

Definition ∞ A Financial Safety Net comprises mechanisms designed to protect individuals and the broader financial system from severe economic shocks or institutional failures. These typically include deposit insurance, lender of last resort facilities, and robust regulatory oversight. In traditional finance, these measures aim to maintain stability and public confidence.
Context ∞ The discussion in digital assets centers on the absence of such established protections for cryptocurrency holdings and decentralized finance protocols. A key debate addresses the feasibility and desirability of extending traditional safety nets to the nascent decentralized space. Future developments might involve industry-led insurance solutions, new regulatory frameworks, or decentralized mutual aid protocols designed to offer some form of protection for digital asset users.