Navigating the Future: Insights into Responsible Digital Asset Management for RIAs

Marc Nichols, CIMA®,WMCP®
November 20, 2023

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In a recent enlightening conversation with Marc Nichols, Product Director at Arbor Digital, Digital Asset Research CEO Doug Schwenk delved into the intricate world of responsible digital asset management for Registered Investment Advisors (RIAs). This dialogue, rich with insights, uncovers the nuanced approach needed in the ever-evolving digital asset landscape. Nichols sheds light on the importance of unwavering safety and security measures, the disciplined decision-making process, and the critical role of fiduciary standards in managing digital assets. This blog post aims to unpack the key takeaways from their discussion, offering valuable perspectives for RIAs navigating the dynamic digital asset domain.

Definition of Responsible Digital Asset Management

Marc Nichols emphasizes that responsible digital asset management involves not compromising on foundational safety and security measures, maintaining a disciplined decision-making framework, and adhering to a fiduciary standard with accountable governing bodies.

Vendor and Counterparty Diligence

Nichols stresses the importance of applying rigorous safety and security standards in digital asset management, akin to traditional asset and wealth management. This includes not compromising on qualified custody, trading systems, cybersecurity, and verified audits from credible firms.

Asset Diligence

Nichols points out the necessity of continuous diligence for digital assets, given their nature as a 24/7/365 asset class. He underlines the importance of network effects, tokenomics, and a loyal community with a robust governance structure.

Due Diligence for RIAs

The conversation highlights that due diligence is crucial for the safekeeping of client assets and for maintaining the trust of investors. Nichols mentions that in the absence of strict regulations for digital assets, advisors need to proactively satisfy regulatory requirements to avoid wealth destruction scenarios.

Interest in Crypto Assets

Nichols observes a growing interest in crypto assets among clients, driven by their value systems and the opportunity to invest in future-oriented technologies. He notes that this investment trend is unique in that it is largely driven by client demand.

Navigating the Future: Insights into Responsible Digital Asset Management for RIAs

Definition of Responsible Digital Asset Management

Vendor and Counterparty Diligence

Asset Diligence

Due Diligence for RIAs

Interest in Crypto Assets

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