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Crypto Due Diligence Checklist for RIAs

A crypto due diligence checklist for RIAs is a documented review of a digital asset provider or strategy across custody, authority, fees, conflicts, reporting, tax data, compliance fit, and client communication. Completing and recording this review before advising on or implementing crypto exposure helps a firm meet its fiduciary and recordkeeping obligations.

What Crypto Due Diligence Means for an RIA

Crypto due diligence is the structured evaluation an investment adviser performs before recommending or using a digital asset service, custodian, sub-advisor, or product. It documents how the arrangement handles custody, discretion, valuation, reporting, and tax data so the decision can withstand investment committee, compliance, client, and regulator scrutiny. The point is a repeatable process, not a one-time judgment about any single provider.

Why This Matters

Digital assets can create operational and compliance questions that are easy to miss when the conversation starts with performance. A documented process gives the firm a defensible record and a common language for digital asset risk. This work sits alongside your broader crypto compliance checklist for RIAs and ladders up to the firm's overall crypto services for RIAs approach.

The Checklist

Work through each item and record what you find:

  1. Provider legal entity and registration status. Identify the entity you contract with and confirm its registrations. Note that registration alone does not guarantee skill, safety, or results.
  2. Services offered and contractual scope. Read the agreement for what the provider does and does not do.
  3. Custody model and Cryptocurrency qualified custodians have emerged to serve institutional requirements. Qualified custody may be required for register">qualified custodian analysis. Determine whether assets sit with a qualified custodian under the SEC custody rule, and review cold storage, multi-sig, and key-management practices. See qualified custody for RIAs managing digital assets.
  4. Trading authority and discretion. Clarify who can move or trade assets and on what authority.
  5. Fee structure and conflicts. Map all fees and any conflicts, including revenue sharing or affiliated entities.
  6. Asset eligibility and risk framework. Confirm which assets are eligible and how risk is screened.
  7. Manager or model portfolio diligence. If a sub-advisor or model is involved, review process, personnel, and track record. See how RIAs should choose a crypto sub-advisor.
  8. Reporting, valuation, and statements. Check pricing sources, statement frequency, and reconciliation.
  9. Tax data availability. Confirm what cost-basis and gain/loss data clients and tax professionals will receive, including how Form 1099-DA and IRS property treatment apply.
  10. Cybersecurity and operational controls. Request SOC 1 / SOC 2 reports and review incident history.
  11. Client disclosures and education. Confirm disclosures and how clients will be informed of risk.
  12. Ongoing review cadence. Set how often the arrangement will be re-reviewed.

Evidence Standard

This article provides a diligence checklist and does not claim any provider has passed or failed review.

When It May Help

  • An RIA is considering a crypto sub-advisor.
  • The firm is evaluating a crypto SMA, model, ETF, custodian, or platform.
  • A client owns crypto outside the firm and the team needs a review framework.
  • Compliance needs a documented review process.
  • Advisors need a common language for digital asset risk.

When It May Not Be Enough

This checklist does not replace legal or compliance review. Some crypto arrangements may create facts that require tailored analysis, and no process removes market, custody, or tax risk. Consult qualified legal, compliance, and tax professionals on specific facts.

Related Questions

Should custody come first?

Generally, yes. If custody, authority, and reporting are unclear, the strategy may not be implementable in a way that satisfies the SEC custody rule. The answer depends on the facts of each arrangement.

Should RIAs review tax data?

Yes. Digital asset reporting can be complex, and advisors should understand what cost-basis and gain/loss data clients and tax professionals will receive. The IRS generally treats digital assets as property, so confirm how that flows through reporting.

How often should diligence be refreshed?

At least periodically, and whenever the provider, custodian, strategy, regulation, or client use case materially changes. Document each refresh so the firm keeps a current record.

Bottom Line

Crypto due diligence for RIAs connects investment review with custody, compliance, reporting, and tax workflow. A documented process keeps crypto from becoming a series of one-off exceptions and gives the firm a record it can stand behind.

Sources

Compliance Note

This article is for general educational purposes and is not legal, compliance, tax, or investment advice.

Disclosures

DAG Holdings Co is a holding company that does not provide investment advisory, brokerage, administrative, or insurance services to clients. DAG is not a law firm, does not provide legal or tax advice, and does not provide tax preparation services. Tax matters are handled through referrals to qualified independent tax professionals.

DAG Private Client services involve estate matters that require qualified independent counsel in the applicable jurisdiction. LLC formation, trust drafting, and estate planning services are provided in coordination with or by qualified independent legal counsel licensed in the applicable jurisdiction.

Asset protection structures, including Wyoming LLCs and trusts, do not guarantee protection against all claims, creditors, or losses. Outcomes depend on specific facts, jurisdiction, and applicable law.

Insurance products and services are offered through Xure Insurance or its affiliates.

Investment advisory services are offered exclusively through DAG Wealth, an SEC-Registered Investment Adviser (CRD No. 328627). Registration with the SEC does not imply a particular level of skill or training. Form ADV and Form CRS are available upon request or at www.adviserinfo.sec.gov.

Custody arrangements with third-party independent qualified custodians reduce certain risks but do not eliminate them.

Investing in digital assets involves risk, including the possible loss of principal. Digital assets are highly volatile and may not be suitable for all investors. Past performance is not indicative of future results.

Specific fee schedules, scope of engagement, conflicts of interest, and material business practices are disclosed in writing before engagement and in Form ADV Part 2A for the investment-advisory portion.

The information on this site is for general educational purposes and is not legal or tax advice.