Definition ∞ Base capital represents the foundational funds a financial institution or entity must hold to absorb potential losses. This capital acts as a buffer against adverse market conditions or operational setbacks. It ensures the entity’s solvency and ability to meet its financial obligations. Regulators often set minimum base capital requirements to protect consumers and maintain market stability.
Context ∞ Within the cryptocurrency sector, base capital discussions frequently pertain to centralized exchanges and digital asset custodians. Establishing adequate capital reserves is a key aspect of regulatory compliance and risk management for platforms handling user funds. The absence of clear global standards for base capital in crypto remains a subject of ongoing debate among policymakers and industry participants.
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