Definition ∞ A supervisory letter is a formal communication issued by a regulatory authority to a financial institution. This document conveys specific instructions, concerns, or warnings regarding a firm’s operational practices, risk management, or compliance with regulations. It serves as a directive to address identified deficiencies and typically requires a formal response outlining corrective actions. Such letters are a critical tool for regulatory oversight and maintaining financial system stability.
Context ∞ The discussion around supervisory letters in the digital asset sector often relates to guidance issued by banking regulators to financial institutions engaging with cryptocurrencies. A key concern involves ensuring banks adequately assess and mitigate risks associated with digital asset activities. Future letters may provide more granular instructions on capital requirements, liquidity management, and consumer protection for crypto-related services.
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