Crypto due diligence has changed: three questions advisors need to revisit

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 transactions.

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 need to revisit

As digital money, shifting regulatory requirements and AI-enabled infrastructure mature, advisors must review what legal and regulatory due diligence covers. The goal is practical: meet fiduciary duties, protect customer confidence 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 drawing tool; content, direction and review by author

Industry demand

Which customers 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 opened a new chapter for cash management. Stablecoin lending markets, made accessible via platforms such as Axal, offer returns with greater transparency. Featured money market funds and other short-term assets from issuers including BlackRock, Fidelity and JP 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 sweepstakes or money market funds. It is also whether the documented analysis reflects that the adviser considered the client’s best interests, including fees, conflicts and suitability. The SEC’s recent cash-wiping enforcement actions against Wells Fargo Advisors and Merrill Lynch make the point: cash management is not a neutral decision. Stablecoins and signed short-term assets are not generic cash products, but that is the point: their structure can offer significant benefits to the right client, especially where settlement speed, transparency, yield or cross-border movement matter. Advisors must understand the product terms, vendor controls, and customer use case before making a recommendation.

Industry demand

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

2. Link political risk and customer trust

How should regulatory dependence be explained? Political support for and opposition to crypto-growth remains controversial. The GENIUS Act and proposed CLARITY Act represent progress from regulation through enforcement toward more predictable frameworks. But implementing regulations, market conduct, consumer protection and global coordination remain uncertain. Stablecoin yield and ethics debates, including bank opposition and CLARITY legislative hurdles, show the sector continues to be scrutinized by incumbents, private litigants and state attorneys general.

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

Industry demand

Who is liable when an agency workflow affects customer data or transaction execution?

3. The convergence of AI and Crypto

Who is liable when AI affects crypto execution? AI agents are starting to settle transactions on crypto rails, while the IMF and others have flagged gaps in operational resilience and governance. Research on agency trading suggests that validation, accountability and programmable compliance remain uncertain.

This convergence should drive advisers to cover four priorities. Security: Do Product Sponsors Have a Credible View on Quantum Readiness? Dust 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, monitored and verified 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 SP and the recent Fidelity data breach settlement show why customer data governance matters when AI tools touch customer and confidential information, including incentives, outputs and data used for training.

These trends will continue to evolve. Advisors who deliver trusted crypto recommendations will be those 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 federal agency 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 go into effect?

That will all change when GENIUS goes live. The statute becomes effective on the earlier of January 18, 2027, or 120 days after the primary federal payments 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. That rulemaking is currently underway. The rules for foreign payment stablecoin issuers will take effect on the same effective date timeline.

– Aaron Brogan, Founder and Managing Attorney, Brogan Law

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