Definition ∞ A fit and proper test is an assessment conducted by regulatory authorities to determine if individuals or entities are suitable to hold positions of responsibility in financial institutions. This evaluation considers competence, honesty, integrity, and financial soundness. It is a critical component of licensing and ongoing oversight processes.
Context ∞ In the digital asset industry, the fit and proper test is increasingly applied to executives and board members of Virtual Asset Service Providers (VASPs) seeking licenses. Regulators aim to ensure that leadership possesses the necessary qualifications and ethical standards to manage crypto businesses responsibly. This test is a key element in strengthening governance and reducing misconduct within the crypto sector.
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