Crypto for Advisors: The crypto due diligence questions you forgot to ask

As stablecoins, shifting regulation and AI-enabled infrastructure mature, advisors should revisit three questions their crypto due diligence may no longer fully cover.

What to know:

You’re reading Crypto for Advisors, CoinDesk’s weekly newsletter that unpacks digital assets for financial advisors. Subscribe here to get it every Thursday.

In today’s newsletter, Beth Haddock reviews the three due diligence questions advisors should be asking in 2026: how client cash is managed, how regulatory assumptions should be disclosed and how to manage liability when AI executes crypto trades.

Then, in “Ask an Expert,” Aaron Brogan reviews the GENIUS Act implementation timeline, how things will change once it’s here and what to do in the meantime.

- Sarah Morton

Crypto due diligence has changed: three questions advisors should revisit

As digital money, shifting regulatory requirements and AI-enabled infrastructure mature, advisors need to revisit what legal and regulatory diligence covers. The objective is practical: meet fiduciary duties, protect client trust and adapt as the market changes. Three questions deserve more attention: how client cash is managed, how regulatory assumptions are disclosed and how AI-driven crypto infrastructure is validated.

Prepared with Claude (Anthropic) as a drafting tool; content, direction, and review by author

Diligence Question

Which clients would benefit most from evaluating digital cash management alternatives?

Institutional and cross-border payment clients are a natural place to start.

1. Cash Management Innovation

How should client cash management be reviewed? The GENIUS Act and the growth of stablecoins have opened a new chapter for cash management. Stablecoin lending markets, made accessible via platforms like Axal, offer yields with increased transparency. Tokenized money market funds and other short-term assets from issuers including BlackRock, Fidelity and J.P. Morgan now hold billions in assets, with on-chain settlement and daily liquidity.

For advisors, the question is not whether digital alternatives should replace traditional cash sweeps or money market funds. It is also whether the documented analysis reflects that the advisor considered the client’s best interests, including fees, conflicts and suitability. The SEC’s recent cash sweep enforcement actions against Wells Fargo Advisors and Merrill Lynch make the point: cash management is not a neutral decision. Stablecoins and tokenized short-term assets are not generic cash products, but that is the point: their structure may offer meaningful advantages for the right client, particularly where settlement speed, transparency, yield or cross-border movement matter. Advisors should understand the product terms, provider controls and client use case before making a recommendation.

Diligence Question

What would change a recommendation of legislation, agency leadership or enforcement posture shifts?

2. Connecting Political Risk and Client Trust

How should regulatory dependency be explained? Political support for and opposition to crypto growth remains contentious. The GENIUS Act and proposed CLARITY Act represent progress from regulation by enforcement toward more predictable frameworks. But implementation regulations, market conduct, consumer protection and global coordination remain unsettled. Stablecoin yield and ethics debates, including bank opposition and CLARITY legislative hurdles, show the sector still faces scrutiny from incumbents, private litigants and state attorneys general.

The enforcement shift under SEC Chairman Atkins illustrates why client communication matters. A platform under active enforcement one year can be cleared the next, and the reverse is possible under a future administration. Advisors should not overpromise certainty. Advisors should disclose regulatory assumptions and risks behind portfolio recommendations and update those assumptions as legislation and enforcement posture evolve.

Diligence question

Who is accountable when an agentic workflow touches client data or transaction execution?

3. The Convergence of AI and Crypto

Who is accountable when AI touches crypto execution? AI agents are beginning to settle transactions on crypto rails, while the IMF and others have flagged gaps in operational resilience and governance. Research on agentic commerce suggests validation, liability and programmable compliance remain unsettled.

This convergence should push advisors to cover four priorities. Security: do product sponsors have a credible view on quantum readiness? Substance over hype: the SEC’s AI-washing cases remind us that claims about AI capabilities must be verifiable. Validation and controls: how are AI outputs tested, supervised and authenticated before they are used in advice, trading or client communications? Are platforms that prepare transactions for users transparent user interfaces or opaque in their operations? Privacy: amended Reg S-P and the recent Fidelity data breach settlement show why client data governance matters when AI tools touch client and confidential information, including prompts, outputs and data used for training.

These trends will keep evolving. Advisors who deliver trustworthy crypto recommendations will be the ones whose diligence accounts for AI innovation, political risk and the best cash management options for their clients. Where is your practice least prepared?

- Beth Haddock, managing partner and founder, Warburton Advisers

Ask an Expert

When interacting with stablecoins, is it important to evaluate whether they are the GENIUS-compliant type, or the old MTL-only type?

The GENIUS Act was signed into law on July 18, 2025. Despite this, to date, stablecoins remain regulated under the old regime. While GENIUS will introduce cross-agency federal oversight, as well as many requirements including limiting reserve composition, current stablecoins are still issued using state money transmitter licenses (MTLs) without dedicated federal oversight.

The GENIUS Act will change the risk profile of legal stablecoins in the United States, but when will it take effect?

This will all change when GENIUS takes effect. The statute becomes effective on the earlier of January 18, 2027, or 120 days after the primary federal payment stablecoin regulators issue final implementing regulations. It separately directs the federal payment stablecoin regulators, state payment stablecoin regulators and the Secretary of the Treasury to coordinate to promulgate rulemaking by July 18, 2026. Those rulemakings are currently in progress. The rules governing foreign payment stablecoin issuers will become operative on the same effective-date timeline.

- Aaron Brogan, founder and managing attorney, Brogan Law

Keep Reading

• The Digital Asset Market Clarity Act has officially been placed on the U.S. Senate Legislative Calendar.
• Mastercard adds additional regulated stablecoins to its settlement network.
• Stripe, Visa and Mastercard said to be among backers of soon-to-debut stablecoin platform.

Looking for more? Receive the latest crypto news from coindesk.com and market updates from coindesk.com/institutions.

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