Definition ∞ Liability management involves the strategic administration and control of an entity’s financial obligations and associated risks. In the context of digital assets, this is particularly relevant for platforms and custodians holding user funds. Effective management aims to maintain financial solvency and protect against adverse market events. It is a critical aspect of operational stability.
Context ∞ For cryptocurrency exchanges and decentralized protocols, robust liability management is essential for safeguarding user assets from security breaches, market volatility, or operational failures. Regulatory bodies increasingly scrutinize liability management practices to ensure consumer protection. Transparent reporting and adequate reserves are key components of responsible liability management.
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