Definition ∞ Third-party risk oversight involves the systematic process of identifying, assessing, and managing potential risks introduced by external service providers or partners. In the digital asset space, this extends to evaluating the security, operational integrity, and compliance of crypto exchanges, custodians, wallet providers, and other external entities that interact with a firm’s digital holdings. It ensures that external dependencies do not compromise internal security or regulatory standing.
Context ∞ Third-party risk oversight is a growing concern for institutions and regulated entities engaging with digital assets, as highlighted in numerous news reports on security breaches or operational failures involving external providers. Regulators increasingly demand robust frameworks for managing these risks, impacting how financial firms select and monitor their crypto-related partners. Effective oversight is vital for maintaining trust and stability in the digital asset ecosystem.
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