As stablecoins, evolving regulations, and AI-enabled frameworks advance, advisors should reassess three crucial questions that may no longer be adequately addressed in their crypto due diligence.
By Beth Haddock|Edited by Sarah Morton Jun 4, 2026, 3:00 p.m. 4 min readMake preferred on (Getty Images/ Unsplash+)Key Insights:
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In this edition, Beth Haddock highlights three critical questions advisors should be asking in 2026: the management of client cash, the disclosure of regulatory assumptions, and the handling of liability in AI-executed crypto transactions.
Additionally, in “Ask an Expert,” Aaron Brogan discusses the timeline for the GENIUS Act's implementation, the expected changes, and what advisors should do in the interim.
Revisiting Crypto Due Diligence: Three Essential Questions for Advisors
As digital currencies, regulatory frameworks, and AI-enabled infrastructure evolve, advisors must reconsider the scope of their legal and regulatory diligence. The aim is straightforward: fulfill fiduciary responsibilities, maintain client trust, and adapt to market changes. Three questions warrant renewed focus: the management of client cash, the disclosure of regulatory assumptions, and the validation of AI-driven crypto infrastructure.
Three legal and regulatory questions advisors should considerDiligence Question
Which clients would benefit most from assessing digital cash management alternatives?
Institutional clients and those involved in cross-border payments are ideal starting points.
1. Innovations in Cash Management
What is the best way to evaluate client cash management? The advent of the GENIUS Act and the rise of stablecoins have ushered in a new era for cash management. Markets for stablecoin lending, facilitated by platforms like Axal, now offer yields with improved transparency. Tokenized money market funds and other short-term financial products from major issuers such as BlackRock, Fidelity, and J.P. Morgan currently manage billions in assets, featuring on-chain settlements and daily liquidity.
For advisors, the critical question extends beyond whether digital alternatives should supplant traditional cash sweeps or money market funds. It also involves whether the documented analysis demonstrates that the advisor has prioritized the client's best interests, including considerations of fees, conflicts, and suitability. The recent SEC enforcement actions against Wells Fargo Advisors and Merrill Lynch emphasize that cash management decisions are not trivial. Stablecoins and tokenized short-term assets are not standardized cash products, but their structures can provide substantial benefits for the right clients, especially where settlement speed, transparency, yield, or cross-border transactions are significant. Advisors must grasp the product terms, provider controls, and client use cases before making recommendations.
Diligence Question
What factors could alter recommendations regarding legislation, agency leadership, or enforcement approaches?
2. Linking Political Risk to Client Trust
How should regulatory dependencies be communicated? Political dynamics surrounding the growth of crypto remain divisive. The GENIUS Act and the proposed CLARITY Act represent a shift from enforcement-driven regulation towards more stable frameworks. However, issues related to implementation regulations, market behavior, consumer protection, and global coordination are still in flux. Ongoing debates over stablecoin yields and ethical considerations, including bank resistance and CLARITY legislative challenges, indicate that the sector continues to face scrutiny from established players, private litigants, and state attorneys general.
The enforcement shift under SEC Chairman Atkins highlights the importance of client communication. A platform that is under active enforcement one year may be cleared the next, and vice versa in a future administration. Advisors should avoid overpromising certainty. They must disclose regulatory assumptions and risks associated with portfolio recommendations and adjust these assumptions as legislation and enforcement strategies evolve.
Diligence Question
Who bears responsibility when an automated process influences client data or transaction execution?
3. Merging AI with Crypto
How is accountability defined when AI is involved in crypto execution? AI agents are now beginning to facilitate transactions on crypto networks, while organizations like the IMF have flagged concerns regarding operational resilience and governance. Research into agentic commerce suggests that validation, liability, and programmable compliance remain ambiguous.
This convergence urges advisors to prioritize four key areas. Security: do product sponsors possess a credible understanding of quantum threats? Substance over hype: the SEC’s AI-washing cases remind us that claims about AI capabilities must be substantiated. Validation and controls: how are AI outputs tested, monitored, and authenticated before being utilized in advice, trading, or client communications? Are the platforms that prepare transactions for users transparent in their operations or do they operate opaquely? Privacy: updated Reg S-P and the recent settlement involving Fidelity underscore the necessity of proper governance of client data when AI tools interact with sensitive information, including prompts, outputs, and training data.