Definition ∞ Insolvency law clarity refers to unambiguous legal provisions that govern the handling of distressed or bankrupt entities, particularly concerning digital assets. It establishes clear rules for the identification, valuation, and distribution of virtual assets belonging to an insolvent firm. Such clarity provides predictability for all stakeholders during periods of financial distress.
Context ∞ The lack of insolvency law clarity for digital asset firms remains a significant concern for investors and creditors, especially following recent high-profile bankruptcies in the crypto sector. Jurisdictions are currently grappling with how traditional insolvency principles apply to decentralized autonomous organizations and commingled digital assets. Legislative efforts aim to provide clearer guidance to courts and practitioners navigating these complex cases.
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