Advisors weigh reputational risks, regulatory shifts in digital asset adoption

Financial advisors remain divided on integrating digital assets into client portfolios, balancing fiduciary concerns with reputational risks, according to a newly published study by CoinShares.

The report found that while institutional and market sentiment toward cryptocurrencies is shifting, many advisors are hesitant due to uncertainty surrounding regulatory guidance and market volatility.

Feeling conflicted on crypto

Out of 250 advisors Coinshares surveyed, 62 percent believe recommending speculative assets such as Bitcoin does not align with their fiduciary duty. Part of that could come down to the inherent volatility in cryptocurrency performance, which 53 percent of advisors ranked as a top concern when advising clients on potential digital investments.

On top of that, more than half of all advisors surveyed shared concerns that endorsing digital assets could weigh on their professional relationships.

"Advisors are caught in a challenging position, trying to navigate conflicting positions between their colleagues and clients," Jean-Marie Mognetti, CEO of CoinShares, said in a statement announcing the findings.

The mounting momentum in cryptocurrency ETFs – where Litecoin ETFs and blended Bitcoin and Ether strategies could prove to be the next frontier – combined with shifting post-election sentiment, has led many advisors to reassess their approach to digital assets. Eighty-five percent of advisors in the study reported a change in their firms’ attitudes toward cryptocurrency since the election, while 80 percent noted increased client enthusiasm for the asset class.

"Investor interest in digital assets has been growing for more than a decade, but has been historically niche; we are now at an inflection point where mainstream adoption is a reality," Mognetti said.

Regulation sets the tone

Regulatory clarity remains a key factor in how advisors present digital assets to clients. An 88 percent majority of respondents were more optimistic about digital assets following the SEC’s approval of Bitcoin and Ethereum ETFs. Additionally, 62 percent ranked SEC approval among the top three factors influencing their ability to discuss digital assets as an investment opportunity.

The federal regulator has undergone a drastic shift in its stance over the past month, with the new leadership under Acting Chair Mark Uyeda establishing a crypto task force to create a formal regulatory framework for digital assets. Previously under Gary Gensler, the agency had taken an antagonistic stance with legal actions  against numerous crypto firms – including a long-running case against crypto goliath Binance that the new SEC has asked to put on hold – aimed ostensibly at protecting investors and preserving the integrity of capital markets.

"Clear guidance, both at a firm level and at a regulatory level, will be essential to navigating this divide in 2025," Mognetti said.

As clients continue exploring cryptocurrency independently, 79 percent of advisors see their role shifting toward risk management. To that end, more than 80 percent of said they are willing to pay for digital asset education, though 43 percent cited a perceived bias in the information published by crypto-native firms as a challenge.