Insolvency Claim Priority

Definition ∞ Insolvency Claim Priority determines the order in which creditors receive payment when an entity is unable to meet its financial obligations and declares bankruptcy. This legal hierarchy dictates which claims are satisfied first, such as secured creditors before unsecured ones. In the context of digital asset platforms, this principle becomes critical during exchange failures. It protects various stakeholders.
Context ∞ The insolvency claim priority for digital asset holders remains a complex and often debated issue during crypto exchange bankruptcies, as the legal classification of user assets varies by jurisdiction. Regulatory frameworks are evolving to provide clearer guidance on asset segregation and client protection. This discussion is vital for safeguarding user funds and restoring trust in centralized digital asset services.