Digital assets have grown into a mainstream allocation within the alternatives industry. The total cryptocurrency market cap stood near $2.7 trillion at the beginning of November, despite a volatile year. Spot bitcoin exchange-traded funds recorded $643 million in net outflows on October 30, the largest one-day exit since June and roughly 64% of their 2026 net inflows. The same funds lost a further $398.6 million on November 2, pushing the two-session total net outflows past $1 billion.
If you are preparing to launch, or already running, a digital asset fund, the market’s direction will not change what your auditor asks. Two questions perhaps matter more than any others: does the fund truly own what it says it owns, and is the asset valued correctly? Nearly everything else in a digital asset and crypto fund audit supports one of those two answers.
Custody Is Where the Audit Begins
Confirming existence, meaning that the fund’s holdings are not fictitious and reside on a public blockchain ledger, is the most consequential audit risk managers will face. In a traditional alternative investment fund, a qualified custodian such as a prime broker or bank holds the assets, and its SOC 1 report gives your auditor a documented control environment to rely on. Digital assets and crypto complicate that picture. Only a limited number of custodians, including Coinbase and Gemini, currently maintain SOC 1 reports that meet the standard for a qualified custodian under the U.S. Securities and Exchange Commission (SEC) Custody Rule.
In September 2025, SEC staff broadened that list by issuing no-action relief permitting state-chartered trust companies to serve as qualified custodians for digital assets, provided they use written custody agreements that prohibit rehypothecation and require full segregation of client assets. The SEC has also sent a broader custody rule rewrite to the White House, with a formal proposal possible before the end of 2026.
Even with more custodians available, many tokens still fall outside what a qualified custodian will accept, and you may be left to self-custody using cold storage. That raises a distinct set of control questions for your auditor: who holds the private keys, how is access restricted, what backup exists if a device is lost or damaged, and how do you confirm that a self-custodied position exists and belongs to your fund at period end? A written custody policy that answers these questions before the audit begins is the fastest way through this part of the engagement.
Questions Your Auditor Should Ask About Custody
- Who has access to your fund’s private keys, and how is that access controlled?
- Does your fund use a qualified custodian, and can it produce a current SOC 1 report?
- For self-custodied tokens, what backup and disaster recovery procedures do you have in place?
- How do you confirm existence and ownership for each digital asset position at period end?
Valuation Rests on Fair Value, and Disclosure Expectations Have Grown
Once existence is established, the audit turns to valuation. Investment funds have long carried their investments at fair value, so measurement itself is familiar territory. The Financial Accounting Standards Board (FASB)’s Accounting Standards Update (ASU) 2023-08, effective for fiscal years beginning after December 15, 2024, moved most entities holding crypto assets from the intangible-asset, cost-less-impairment model to fair value measurement each period, with gains and losses recognized in net income.
For funds, which are already measured at fair value, the more significant change is disclosure. The ASU brings investment companies into its scope for crypto-specific disclosures, including significant holdings and an annual roll-forward of crypto asset activity covering additions, disposals, and gains and losses. Your auditor will test that roll-forward against your records, so your reported result depends on getting fair value right every reporting period, not only when you sell a position.
Fair value is harder to pin down for digital assets than it sounds. Your tokens often trade across multiple exchanges simultaneously, and periods of volatility can produce meaningful price spreads between venues. A documented valuation policy that specifies which pricing sources you use, and why, protects you against the appearance of selectively choosing whichever exchange produces the most favorable price, a pattern that draws scrutiny from both auditors and regulators.
Stablecoins and Lending Arrangements Are Part of the Audit Scope Now
A comprehensive digital asset fund audit extends beyond spot holdings. Many funds hold stablecoins as dry powder, for trade settlement, or as collateral posted to exchanges and lending counterparties. The Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), signed into law in July 2025, established the first federal framework for payment stablecoins, requiring issuers to hold one-to-one reserves in cash or short-term Treasuries.
That framework governs issuers, not funds, but it gives your auditor a benchmark. If your fund holds stablecoins, expect questions about the issuer’s reserve reporting, where the tokens are held (your wallet or an exchange), your ability to redeem at par, and how you would value them if the peg broke.
The American Institute of CPAs (AICPA) has also updated its nonauthoritative Digital Assets Practice Aid to address crypto lending and borrowing arrangements and mining revenue recognition. If your fund engages in these activities, raise them with your auditor early, well before year-end testing begins, since both introduce judgment calls best resolved before the numbers are finalized.
Existence, Valuation, and Controls Drive the Audit
A digital asset fund audit ultimately rests on the same three pillars as any fund audit: existence, valuation, and the controls that support both. What differs is the amount of documentation you need ready, including custodian selection and SOC 1 coverage, a written valuation policy, self-custody controls, and, in many cases, stablecoin reserve reporting and lending agreements.
Your Guide Forward
Funds that assemble this documentation before the engagement starts consistently move through the audit faster and field fewer follow-up questions. If you are preparing to launch a digital asset or crypto fund or refining the audit readiness of one you already operate, a conversation with an experienced auditor is worth the time.
