The most recent lawsuits served by the SEC don’t seem to have cooled interest from investors in digital assets. Far from it: we see on-chain traffic flocking to DeFi protocols that support staking and decentralized trading. As the crypto industry continues to evolve, financial advisors (FAs) and registered investment advisors (RIAs) must stay up to date on the latest regulatory developments and provide guidance to clients who are interested in investing in digital assets.
The freedom to trade whenever and wherever is a powerful tool for the democratization of investing, but it also requires investors to take on more responsibility. FAs and RIAs can help by providing clients with the right tools to manage digital assets directly, while also exercising caution.
One way to do this is by leveraging held-away investing accounts (through Coinbase or Gemini) to provide insights when clients want to take the reins. It’s also important to diversify holdings and invest across a variety of trusted exchange platforms. Qualified custodians allow investors to leverage different forms of custody for client funds that are secured, vetted, and can utilize hot and cold wallet technology.
Modern Portfolio Theory still applies to digital asset management, and it’s important to invest intelligently and mitigate risk by diversifying holdings and leveraging tools that let you invest for clients across a variety of trusted exchange platforms. Leveraging indices and models from experts in the digital asset space can also be incredibly helpful.
Tokenized assets (a.k.a. real-world assets or RWAs) like private equity, real estate, and art, among other alternatives, are giving investors the ability to broaden their digital asset exposure through access to otherwise restricted investment vehicles. As the regulatory landscape evolves, advisors must keep a close eye on asset designations and key findings to be sure they’re investing in the most compliant, intelligent way possible.