In today’s newsletter, Beth Haddock reviews the three due diligence questions advisors should be asking in 2026: how to manage client cash, how to disclose regulatory assumptions, 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, changing regulatory requirements and AI-enabled infrastructure mature, advisors need to revisit what legal and regulatory due diligence covers. The goal is practical: meet fiduciary duties, protect customer confidence, and adapt as the market changes. Three issues deserve more attention: how client cash is managed, how regulatory assumptions are exposed, and how AI-powered crypto infrastructure is validated.
Prepared with Claude (Anthropic) as drawing tool; content, direction and review by author
Diligence questions
Which customers would benefit most from evaluating digital cash management alternatives?
Institutional and cross-border payment customers are a natural place to start.
1. Cash Management Innovation
How should the client’s cash management be reviewed? The GENIUS Act and the growth of stablecoins have opened a new chapter for cash management. Stablecoin lending markets made available through platforms like Axal offer returns with increased transparency. Tokenized 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 advisers, 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 adviser considered the best interests of the client, 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 can provide meaningful benefits to the right customer, especially where settlement speed, transparency, returns or cross-border movements matter. Advisors should understand the product terms, provider controls, and customer use case before making a recommendation.
Diligence questions
What would change a recommendation of legislation, agency management, or enforcement positions?
2. Linking political risk and client confidence
How should regulatory dependence be explained? Political support for and opposition to crypto growth remains contentious. The GENIUS Act and the proposed CLARITY Act represent progress from regulation by enforcement toward a more predictable framework. However, implementing regulations, market conduct, consumer protection and global coordination are still unclear. Stablecoin dividend and ethical debates, including bank opposition and CLARITY legislative hurdles, show the sector still faces scrutiny from incumbents, private lawsuits and state attorneys general.
The enforcement shift under SEC Chairman Atkins illustrates why client communication is important. A platform under active enforcement one year may be cleared the next, and the reverse is possible under a future administration. Advisors should not overpromise security. Advisers should disclose regulatory assumptions and risks behind portfolio recommendations and update those assumptions as legislation and the enforcement position evolves.
Diligence questions
Who is responsible when an agent’s workflow affects client data or transaction execution?
3. The Convergence of AI and Crypto
Who is responsible 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 agency trading suggests that validation, accountability and programmable compliance remain unresolved.
This convergence should push advisers to cover four priorities. Security: do product sponsors have a credible view of 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, monitored and authenticated before they are used in advice, trading or customer communication? 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 client data governance matters when AI tools touch client and confidential information, including prompts, output and data used for training.
These trends will continue to develop. Advisors who provide credible crypto recommendations will be those whose care stands 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 assess whether they are the GENIUS-compatible type or the old MTL-only type?
The GENIUS Act was signed into law on July 18, 2025. Despite this, to date stablecoins are still 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 US, but when will it go into effect?
All this will change when GENIUS comes into effect. The statute will take effect on the earliest 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 underway. The rules for foreign payment stablecoin issuers will take effect on the same enactment timeline.
– Aaron Brogan, Founder and Managing Attorney, Brogan Law
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