Mandatory Audits

Definition ∞ Mandatory audits are legally required examinations of financial records, smart contract code, or operational procedures to ensure accuracy, security, and compliance with regulations. In the digital asset domain, these often apply to centralized exchanges, stablecoin issuers, or decentralized finance protocols to verify asset reserves, protocol integrity, and adherence to security standards.
Context ∞ The discussion around mandatory audits is a significant aspect of regulatory proposals for the cryptocurrency sector, aiming to enhance investor protection and market transparency. News often highlights calls for such audits following security breaches or solvency concerns within the digital asset ecosystem. Implementing these requirements presents challenges regarding cost and standardization across diverse platforms.