In today’s newsletter, Beth Haddock reviews the three due diligence questions advisors should be asking in 2026: how client liquidity 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 timeline for implementing the GENIUS Act, how things will change once it’s in place, and what to do in the meantime.
-Sarah Morton
Crypto Due Diligence Has Changed: Three Questions Advisors Should Revisit
As digital money, changing regulatory requirements and AI-enabled infrastructure evolve, advisors need to revisit what legal and regulatory diligence covers. The goal is practical: meeting fiduciary obligations, protecting customer trust, and adapting to changing market conditions. Three issues deserve more attention: how customer liquidity is managed, how regulatory assumptions are disclosed, and how AI-based crypto infrastructure is validated.
Prepared with Claude (Anthropic) as a writing tool; content, direction and review by author
Question of diligence
Which customers would benefit most from evaluating digital cash management alternatives?
Institutional and cross-border payments customers are a natural starting point.
1. Cash management innovation
How to review customer cash flow management? The GENIUS Act and the growth of stablecoins have opened a new chapter for cash management. Stablecoin lending markets, made accessible through platforms like Axal, offer returns with increased transparency. Tokenized money market funds and other short-term assets from issuers such as 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 sweeps or money market funds. It also involves whether the documented analysis shows that the advisor considered the client’s best interests, including fees, conflicts and convenience. The SEC’s recent enforcement actions against Wells Fargo Advisors and Merrill Lynch clearly demonstrate that cash management is not a neutral decision. Stablecoins and tokenized short-term assets are not generic monetary products, but that’s the important point: their structure can provide significant benefits to the right customer, especially where settlement speed, transparency, yield, or cross-border movement are important. Advisors should understand the product terms, vendor controls, and customer use case before making a recommendation.
Question of diligence
What would change a recommendation for legislation, agency leadership, or a change in enforcement posture?
2. Linking political risk and customer trust
How to explain regulatory dependence? Political support and opposition to crypto growth remains controversial. The GENIUS Act and the proposed CLARITY Act represent progress from regulation through enforcement to more predictable frameworks. But implementing rules, market conduct, consumer protection and global coordination remain unresolved. Debates over stablecoin performance and ethics, including bank opposition and CLARITY legislative hurdles, show the sector still faces intense scrutiny from incumbents, private litigants and state attorneys general.
The enforcement change under SEC Chairman Atkins illustrates why customer communication is important. A platform subject to active enforcement one year may be authorized the next year, and the reverse is possible under a future administration. Advisors should not promise too much certainty. Advisers must disclose the regulatory assumptions and risks underlying portfolio recommendations and update those assumptions as legislation and enforcement evolves.
Question of diligence
Who is responsible when an agent workflow affects customer data or transaction execution?
3. The convergence of AI and cryptography
Who is responsible when AI affects the execution of cryptocurrencies? 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 agent commerce suggests that validation, accountability, and programmable compliance remain unresolved.
This convergence should push advisors to cover four priorities. Security: Do product sponsors have a credible view of quantum readiness? Substance over hype: The SEC’s AI wash cases remind us that claims about AI capabilities must be verifiable. Validation and controls: How are AI results tested, supervised and authenticated before being used in consulting, trading or customer communication? Are the platforms that prepare transactions for users transparent or opaque user interfaces in their operations? Privacy: The amended Reg SP and Fidelity’s recent data breach settlement show why customer data governance is important when AI tools touch customer and confidential information, including prompts, outputs, and data used for training.
These trends will continue to evolve. Advisors who provide reliable crypto recommendations will be those whose diligence considers AI innovation, political risk, and the best cash management options for their clients. Where is your office 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 this day, stablecoins remain regulated by the old regime. Although GENIUS will introduce interagency federal oversight, as well as numerous requirements including limiting reserve composition, current stablecoins are still issued using State Money Issuer Licenses (MTL) 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?
All of this will change when GENIUS comes into effect. The law takes effect on January 18, 2027, or 120 days after key federal payment stablecoin regulators issue final implementing regulations, whichever comes first. It separately directs federal payments stablecoin regulators, state payments stablecoin regulators, and the Secretary of the Treasury to coordinate to promulgate rules by July 18, 2026. These rules are currently pending. The rules governing foreign issuers of payment stablecoins will come into effect on the same effective date.
– Aaron Brogan, Founder and Managing Attorney, Brogan Law
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