By Damien Black
Fiduciaries have their work cut out for them now that stablecoins and tokens are moving into the mainstream of finance. Heightened due diligence, added compliance, and new regulations are core challenges for those tasked with looking after other people’s money in the tokenization age.
Because fiduciaries – corporate bank boards, investment advisers, trustees and the like – must transparently disclose all conflicts of interest to their clients, they have greater responsibility than regular brokers or dealers. This arguably makes the brave new world of tokenization look rather nightmarish for them – risks, if taken at all, must be thoroughly analyzed first, and stablecoins and tokens present, well, a brave new world of risk.
At least some guidance exists in the form of the GENIUS Act, which “marks a watershed moment for the US financial sector, particularly in the regulation and adoption of stablecoins,” according to Certuity. The wealth management firm added: “For Registered Investment Advisers (RIAs) and fiduciaries, the legislation establishes new compliance requirements, opens innovative portfolio possibilities, and brings both opportunity and greater scrutiny to digital asset adoption within fiduciary frameworks.”
This includes ensuring stablecoins are backed one-for-one by dollars or US Treasuries and that regulated entities, such as federal banks or non-bank issuers approved by the GENIUS Act, issue digital currencies. Like anyone else, fiduciaries can benefit from 24/7 settlements and reduced costs through things like the automated smart contracts that stablecoins enable, as well as purchasing fractionalized shares in tokenized commodities on behalf of their clients – presumably the opportunity Certuity is talking about.
Stablecoins vs tokens
The problem is that this opportunity comes with heavy caveats for fiduciaries, who must strictly abide by regulation. Marcel Thiess, CEO of Thiess Invest, works in global markets and regulation, and he thinks stablecoins and tokens differ in the challenges they pose for fiduciaries.
Thiess says the GENIUS Act should make their job easier a propos of stablecoins because it put reserve and licensing obligations on non-bank issuers from July 2025, with MiCA doing something similar in Europe by authorizing issuers like Circle and “pushing the rest off regulated venues”.
“Stablecoins are mostly a counterparty question,” according to Thiess. “Say you are a trustee and part of the portfolio sits in USDC. Your job there has very little to do with blockchain. It is who issued this, are the reserves actually where they say they are, and can I redeem at par on a bad Tuesday? That is credit analysis, and fiduciaries have been doing that work for a hundred years.”
But when it comes to tokenization, the game is a bit trickier: “If you hold a token representing a fractional interest in a building or a corporate bond, you have to establish whether that token actually gives you a claim on the asset when the issuer goes bankrupt. That means reading the off-chain contract and checking whether the ledger entry maps onto it properly. Most trustees have never had to do that, and there is not much case law to lean on yet.”
For bank boards, the real issue is funding rather than compliance, Thiess adds, because the Bank for International Settlements has shown that when corporate clients move deposits into stablecoins, the money exits a commercial bank’s reserve base much faster than a normal deposit outflow. This means boards are now having to model intraday flows they never had to before.
For registered investment advisers (RIAs), the watershed occurred in March this year, when the US Department of Labor proposed letting fiduciaries incorporate digital assets into 401(k) tax-deferred retirement plans. “That opens the door and increases the diligence burden at the same time,” said Thiess. “RIAs also cannot self-custody, so they lean on sub-custodians like Fidelity Digital Assets or BitGo, and auditing those becomes part of the annual routine.”
Despite that, Thiess thinks the problem is manageable for fiduciaries. He also has one nugget of advice: tokenized deposits probably represent the best of a bad bunch in terms of the operational difficulties stablecoins and tokenization create, so they should lean into them.
“Tokenized deposits are the easy case, which is why banks keep pushing them,” he said. “A tokenized deposit is still a bank liability, just moving over different rails, so it sits inside the legal and insurance frameworks that already exist. If a fiduciary wants exposure without rebuilding their whole risk framework, that is the path of least resistance.”
GENIUS isn’t fail-safe
It’s worth noting that the GENIUS Act is by no means a get-out-of-jail-free card. Certuity notes that “new insurance, reserve, and audit provisions reduce, but do not eliminate, custodial and default risk”. It added: “Advisers must now formally consider whether, and how, stablecoins fit within a prudent investment strategy for clients, including documentation of risks and compliance factors.”
If you’re thinking this adds up to a headache for fiduciaries, you’re probably not wrong. Times are a’ changing, and nobody likes change for a reason. But like it or not, tokenization has entered the mainstream and it needs to be regulated. That means it’s going to be part of the professional landscape for fiduciaries – on both sides of the pond. Writing in the Intersection in June, Allan Lane said: “Fund tokenization has been five years away for about a decade. Then, on 30 April 2026, it quietly stopped being a future technology and became a regulated one.” The date refers to a Financial Conduct Authority (FCA) tokens policy statement, which “took effect with immediate force, formally bringing tokenized funds inside the UK’s existing regulatory perimeter”.
FTI Consulting agrees that stablecoins bring a new layer of complexity to the duty of care owed by those ultimately responsible for other people’s money. “Unlike conventional bank products, stablecoins sit at the intersection of banking regulation, payments infrastructure, digital assets and distributed ledger technology,” said the financial consultant-cum-troubleshooter. “Their hybrid nature raises important questions regarding capital treatment, liquidity management, consumer protection, financial crime risk and operational resilience.”
Bank boards must scrutinise stablecoins closely, and directors need to stay on top of the legal, financial and operational challenges they present. FTI stresses that stablecoins cannot be regarded as a newfangled tech fad: getting involved is “a strategic decision that may affect the institution’s balance sheet, regulatory posture, product offering and risk profile”.
Uneven regulation
Advisers4Advisers runs educational masterclasses and podcasts aimed at finance professionals. In February, it spoke to former SEC employee Tyler Gellasch, who worked on the Dodd-Frank Act in the aftermath of the 2007-2008 financial crisis, aimed at redressing the damage caused by regulations that failed to keep up with systemic risk. Paraphrasing Gellasch afterwards, Advisers4Advisers said: “Some crypto market developments are not about technology and more about operating outside existing securities frameworks.” This distinction matters for fiduciaries: “If a product resembles a traditional security but claims a different regulatory status, advisers must consider whether equivalent investor protections are applicable.”
“Tokenized securities, stablecoins, and parallel derivatives markets often pose questions about jurisdiction and whether their regulation is on par with securities regulations,” added Advisers4Advisers. “You [sic] clients may want regulatory parity and have no idea crypto investing is not on par. When advisers recommend exposure to products operating outside traditional oversight, they assume heightened responsibility for due diligence and disclosure.”
This lies at the heart of Gellasch’s thesis on tokenization and what it portends for fiduciaries: when regulation weakens, fiduciary obligation is not permitted to recede along with it. In other words, the goal posts might have just moved, but bank boards and their ilk still have to go on playing the same game they always have. A cautious one. “If anything, the burden on the adviser increases,” added Advisers4Advisers. “Which could eventually translate into higher liability insurance premiums for professionals and IARs [investment adviser representatives].”
Communication is key
A core part of the challenge for fiduciaries will be explaining, in plain English, the nuances that tokenization and stablecoins bring to the financial landscape. “Clients rarely understand regulatory nuances. Advisers must bridge that gap […] and disclosure should not rely on technical jargon. They must evaluate whether recommending exposure aligns with a client’s sophistication and risk tolerance,” added Advisers4Advisers. “Crypto risk for fiduciaries includes assessing whether clients understand that a product may trade under materially different rules than traditional securities.”
