Operational Due Diligence on Cryptocurrency and Digital Asset Funds

Abstract

This article analyzes three key trends that have emerged among institutional investors performing operational due diligence (ODD) on cryptocurrency and digital asset funds. The first trend is enhanced crypto-specific ODD specialization as compared to other alternative asset classes. The second trend is an institutional focus on crypto custody arrangements. The third trend is a rapid movement toward integrating ODD and investigative due diligence processes in the crypto space.

Key Findings

• ▪ The rigor of operational due diligence on crypto investments and asset managers has increased as more institutional capital has migrated into the crypto space.

• ▪ Crypto asset managers increasingly are focused on developing more institutional operational infrastructures, particularly in areas such as custody for DeFi investments.

• ▪ Investors increasingly combine investigative and operational due diligence processes when evaluating crypto asset managers.