Definition ∞ Systemic collapse denotes a widespread and severe failure within an entire financial system or a significant portion of it. This event involves the cascading failure of multiple interconnected entities or markets. It can lead to a loss of confidence, liquidity crises, and broad economic disruption.
Context ∞ The potential for systemic collapse in traditional finance is a constant regulatory concern, and this concept extends to the rapidly growing digital asset markets. Regulators assess the interconnectedness of various crypto protocols and stablecoins to identify potential contagion risks. Discussions often focus on the need for robust regulatory frameworks and risk management to prevent such widespread market instability.
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