Prudential Risk Framework

Definition ∞ A prudential risk framework is a structured system of rules, guidelines, and processes designed to identify, measure, monitor, and control financial risks within an organization or financial system. Its primary purpose is to safeguard stability and protect against potential losses. In the context of digital assets, such a framework would address risks specific to crypto markets, operations, and technology. It ensures responsible management of capital and exposure.
Context ∞ The need for robust prudential risk frameworks is a recurring theme in regulatory discussions surrounding cryptocurrencies, stablecoins, and decentralized finance. News articles often report on proposals from financial authorities to apply or adapt traditional risk management principles to digital asset firms. Establishing effective frameworks is seen as critical for mainstream adoption and systemic financial stability.