In
today’s
issue,
DJ
Windle
from
Windle
Wealth
looks
at
the
risks
advisors
face
when
they
can’t
or
won’t
help
clients
who
want
exposure
to
digital
assets.
Then,
Hong
Sun
from
Core
DAO
talks
about
custody
and
DeFi
in
Ask
an
Expert.
continues
below
Thank
you
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of
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week’s
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Thursday.
Houston,
Advisors
Have
a
Problem
Financial
advisors
have
largely
ignored
cryptocurrency
for
years,
dismissing
it
as
a
speculative
bubble
or
outright
scam.
Meanwhile,
the
financial
landscape
has
shifted
dramatically.
Major
players
like
BlackRock,
Visa,
Mastercard,
Venmo,
and
many
others
are
integrating
blockchain
technology
and
cryptocurrency
into
their
operations.
The
crypto
ecosystem
is
no
longer
a
backwater
–
it’s
becoming
a
part
of
the
mainstream
economy.
The
disconnect
between
client
interest
and
advisor
readiness
presents
a
stark
choice
for
the
advisory
industry:
adapt
or
risk
losing
clients,
particularly
high-net-worth
clients,
to
more
forward-thinking
competitors.
The
Two
Crypto
Scenarios
When
clients
approach
their
advisors
about
cryptocurrency,
they
typically
encounter
one
of
two
scenarios:
1.
Dismissal
and
Dismissiveness
Advisors
brush
off
client
inquiries
with
the
same
tired
refrain:
“Crypto
is
a
scam,”
“It’s
just
like
tulip
bulbs,”
or
“It’s
too
risky
and
has
no
inherent
value.”
While
advisors
may
feel
this
stance
is
prudent,
clients
often
interpret
it
as
out-of-touch
or
condescending.
2.
Inexperience
and
Inaction
Sometimes,
advisors
are
willing
to
listen
but
lack
the
knowledge
or
tools
to
act.
They
haven’t
taken
the
time
to
educate
themselves
about
cryptocurrency,
and
their
compliance
departments
won’t
allow
them
to
offer
guidance.
These
advisors
are
left
unable
to
help
their
clients
purchase
or
manage
crypto
assets,
leaving
significant
gaps
in
their
service
offerings
and
in
their
clients’
portfolios.
Both
scenarios
lead
to
the
same
result:
frustrated
clients
who
feel
their
advisors
are
unprepared
for
the
future.
Clients
Notice
Let
me
illustrate
this
disconnect
with
a
real-life
example
from
my
practice.
A
client
with
a
net
worth
exceeding
$10
million
approached
their
advisor
about
investing
$50,000
in
cryptocurrency.
The
advisor
dismissed
the
idea,
calling
crypto
a
scam
and
urging
the
client
to
steer
clear.
The
client,
unconvinced
and
having
spent
a
lot
of
time
researching
it,
reached
out
to
their
estate
planning
attorney
for
other
options,
who
in
turn
contacted
me
because
they
didn’t
know
anyone
else
advising
on
cryptocurrency.
We
opened
an
account
for
the
client,
walked
them
through
the
basics
of
this
new
asset
class,
and
provided
the
education
they
needed
to
make
informed
decisions.
Within
a
few
weeks,
this
client
transferred
all
of
their
assets
to
us,
citing
a
lack
of
confidence
in
their
previous
advisor.
Their
parting
words?
“Why
would
I
leave
my
money
with
an
advisor
who
doesn’t
understand
the
future?”
This
story
is
not
unique.
I’ve
received
countless
calls
from
individuals
looking
for
help
because
their
advisors
aren’t
willing,
from
advisors
themselves
asking
me
to
manage
cryptocurrency
investments
for
their
clients
–
and
even
from
advisors
requesting
help
with
their
personal
portfolios.
The
irony
is
glaring:
advisors
who
dismissed
crypto
as
irrelevant
are
finding
themselves
out
of
their
depth
and,
in
many
cases,
out
of
a
client.
The
Perfect
Storm
for
Crypto
Adoption
We’re
at
a
pivotal
moment
for
cryptocurrency.
Several
factors
have
aligned
to
create
a
favorable
environment
for
adoption:
1.
Institutional
Legitimacy
BlackRock,
Fidelity,
and
other
institutional
giants
are
launching
crypto-related
funds
and
digitizing
real-world
assets
like
real
estate,
art,
and
others,
signaling
that
crypto
is
no
longer
a
fringe
asset
but
a
legitimate
part
of
the
investment
landscape.
2.
Regulatory
Shifts
The
anticipated
replacement
of
Gary
Gensler
as
SEC
Chair
marks
a
potential
shift
toward
a
more
supportive
regulatory
framework.
This
could
lower
barriers
for
advisors
and
investors
alike.
3.
Increased
Integration
Companies
like
Visa,
Mastercard,
and
Venmo
are
incorporating
blockchain
technology
into
their
operations,
making
cryptocurrency
more
accessible
and
practical
for
everyday
use.
4.
Client
Demand
Perhaps
most
importantly,
clients
are
driving
this
change.
Distrust
in
the
government
and
the
barge
of
positive
crypto
news
has
put
crypto
at
the
forefront,
and
clients
are
starting
to
do
their
research
and
wonder
why
they’ve
been
left
out
of
this
asset
class.
This
moment
represents
a
once-in-a-generation
opportunity
for
advisors
to
position
themselves
as
leaders
in
a
rapidly
evolving
financial
landscape
and
prove
to
the
public
that
they
aren’t
just
doing
the
same
old
thing
their
predecessors
have.
The
Bottom
Line
The
financial
advisory
industry
is
at
a
crossroads.
Cryptocurrency
is
no
longer
a
speculative
fringe
asset;
it’s
becoming
a
cornerstone
of
the
modern
economy.
Advisors
who
dismiss
or
ignore
it
risk
alienating
their
clients
who
are
looking
for
forward-thinking
guidance.
The
question
isn’t
whether
cryptocurrency
will
play
a
role
in
the
future
of
finance—it
already
does.
The
real
question
is
whether
advisors
will
adapt
in
time
to
meet
their
clients’
evolving
needs.
Those
who
embrace
this
challenge
will
position
themselves
as
trusted
partners
in
a
changing
world.
Those
who
don’t
may
find
themselves
left
behind.
–
DJ
Windle,
founder
and
portfolio
manager,
WIndle
Wealth
Ask
an
Expert
Q.
How
do
you
see
the
evolution
of
custody
models
for
institutional
players?
While
self-custody
aligns
with
the
core
ethos
of
crypto,
it’s
not
always
practical
for
institutions.
Entities
involving
multiple
stakeholders
often
require
custodial
solutions
due
to
regulatory,
compliance,
and
operational
complexities.
Institutional
players
prioritize
regulatory
compliance,
technology
risks,
security,
operational
efficiency,
reputation,
trust,
and
market
liquidity.
Their
approach
balances
embracing
digital
assets’
potential
and
mitigating
associated
risks.
Familiarity
with
custodianship
in
traditional
finance
also
makes
this
model
more
appealing
to
institutions.
By
supporting
both
self-custody
and
third-party
custodial
models,
the
crypto
industry
can
attract
a
broader
range
of
participants.
This
flexibility
enables
institutions
to
engage
with
digital
assets
in
ways
that
align
with
their
operational
and
security
requirements
while
fostering
adoption
and
adhering
to
crypto’s
fundamental
principles.
Q.
How
will
custody
models
enable
a
shift
toward
decentralized
products?
Custody,
whether
delegated
or
DIY,
centers
on
secure
ownership.
Blockchain
technology
offers
a
scalable
asset
control
solution,
benefiting
individuals
and
institutions.
Digital
assets
like
bitcoin
build
trust
in
immutable
code,
enabling
users
to
decide
whom
to
trust
with
storage.
For
decentralized
finance
(DeFi)
adoption,
self-custody
isn’t
a
strict
requirement.
Institutions
can
engage
with
decentralized
applications
while
hiring
custodians
to
safeguard
assets.
This
flexibility
allows
institutions
to
explore
DeFi
products
without
overhauling
custody
models,
fostering
broader
participation
and
innovation
in
the
decentralized
ecosystem.
Q.
With
bitcoin,
DeFi,
and
staking
gaining
traction,
what
needs
to
happen
for
institutional
adoption?
For
institutions,
key
adoption
drivers
include
safety,
sustainability,
and
scalability.
Institutions
require
assurances
to
maintain
full
control
over
their
assets
while
avoiding
risks
like
slashing
or
vulnerabilities
from
external
smart
contracts.
They
also
seek
transparency
in
yield
sources,
preferring
sustainable
activities
within
a
Bitcoin
DeFi
ecosystem.
Scalability
is
critical
as
institutions
must
efficiently
deploy
substantial
capital
and
ensure
the
system
can
handle
it.
Models
that
offer
flexible
options
tailored
to
diverse
user
needs
are
best
positioned
to
support
institutional
involvement
at
scale.
The
same
principles
apply
to
Bitcoin
DeFi
(BTCfi).
Clear
value
propositions,
secure
smart
contracts,
and
deep
liquidity
pools
are
essential
for
adoption.
As
these
elements
mature,
institutions
will
likely
find
BTCfi
appealing,
not
just
for
access
to
bitcoin
ETFs
but
for
more
flexible
derivative
products
that
support
sophisticated
financial
strategies.
–
Hong
Sun,
institutional
contributor,
Core
DAO
