Crypto Due Diligence: Three Questions Advisors Should 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 trades. Then, in "Ask an Expert," Aaron Brogan walks through the $GENIUS Act implementation timeline, what changes once it lands, 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 — 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 comm