Definition ∞ A supervisory system refers to an organized framework of rules, procedures, and entities responsible for overseeing and regulating the activities of financial institutions or markets. Its primary function is to ensure compliance with laws, maintain market stability, protect consumers, and mitigate systemic risks. Such a system typically involves regulatory bodies that set standards and monitor adherence. It provides oversight for operational integrity.
Context ∞ In the evolving digital asset space, the establishment and enforcement of robust supervisory systems are a central theme in global regulatory discussions and news. Governments and international bodies are working to develop frameworks that address the unique risks of cryptocurrencies, stablecoins, and decentralized finance. The effectiveness of these systems is crucial for fostering trust, preventing illicit activities, and enabling the mainstream adoption of digital assets.
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