Definition ∞ Regulated nonbank entities are financial service providers that operate outside the traditional banking system but are subject to oversight by governmental authorities. These entities include money transmitters, payment processors, and certain lending companies. Regulation aims to manage systemic risks and ensure consumer protection.
Context ∞ In the digital asset landscape, many virtual asset service providers (VASPs) are classified as regulated nonbank entities, particularly those offering payment or exchange services. Regulators are extending frameworks to these firms, requiring them to comply with anti-money laundering (AML), cybersecurity, and consumer protection rules. This regulatory expansion seeks to level the playing field and mitigate risks across the financial sector.
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