Client Categorization

Definition ∞ Client categorization involves classifying customers into distinct groups based on regulatory criteria, risk profiles, or service needs. This process helps financial institutions tailor services and apply appropriate consumer protection measures. It ensures compliance with varying regulations regarding investor sophistication and suitability. Accurate categorization is essential for responsible client management.
Context ∞ In the digital asset sector, client categorization is becoming increasingly important due to evolving regulatory landscapes. Firms must accurately classify users to comply with anti-money laundering and know-your-customer regulations. This practice also helps in providing suitable risk warnings and product offerings, especially for retail investors engaging with volatile crypto assets.