A prudential regime is a set of regulations and supervisory practices designed to ensure the safety and soundness of financial institutions and the stability of the financial system. For digital assets, this involves rules regarding capital requirements, liquidity management, risk management, and governance for crypto-native firms or traditional institutions dealing with digital assets. Its objective is to mitigate systemic risks and protect consumers and investors. This framework helps maintain financial integrity.
Context
The establishment of robust prudential regimes for digital asset service providers is a key focus for global financial regulators, frequently appearing in policy announcements and legislative discussions. News reports often cover discussions about tailoring existing financial regulations to the unique characteristics of digital assets. The ongoing efforts to develop comprehensive and internationally harmonized prudential standards are a critical development for the industry.
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