Supervisory Process

Definition ∞ A supervisory process is a systematic method employed by regulatory bodies to monitor and assess the compliance and operational health of regulated entities. This involves periodic examinations, data collection, risk assessments, and the enforcement of corrective actions when necessary. For financial institutions, including those engaging with digital assets, these processes are designed to uphold stability, prevent misconduct, and safeguard consumer interests. The rigor and scope of supervisory processes are often subjects of public and industry discussion.
Context ∞ The application of supervisory processes to entities involved in digital assets is an evolving area of regulatory focus. Authorities are developing or adapting existing frameworks to oversee exchanges, custodians, and issuers of digital tokens. Discussions frequently address the challenges of supervising decentralized entities, the need for international coordination, and the balance between fostering innovation and mitigating risks such as money laundering, fraud, and systemic instability.