In this exclusive interview with Crypto Insights Group, Richey May Partner Steve Vlasak shares how the crypto industry has transformed from minimal regulation to institutionalized standards, and what fund managers need to know about verification, valuation, and the growing appetite for digital asset investments.
The Transformation of Crypto Auditing
The crypto industry has experienced a dramatic shift over the past decade. According to Steve Vlasak, Partner in Richey May’s Alternative Investments Practice, the space “moved from feeling like the Wild West, characterized by bootstrapping efforts and minimal regulation, to a more institutionalized sector with clear guidance on accounting and taxes.”
With approximately $4 trillion now under management and mainstream adoption by companies like Tesla, Square, and PayPal, the maturation is undeniable. Institutional players like BlackRock entering with publicly traded ETFs have added credibility and sparked widespread investor interest. DeFi platforms have become central to the ecosystem, enabling users to lend, borrow, and trade without traditional banks while democratizing finance globally.
Richey May, founded over 40 years ago, has been at the forefront of this evolution. The firm conducts over 1,500 audits annually, serving funds ranging from $1 million to over $10 billion across strategies including cryptocurrency trading, arbitrage, DeFi protocols, and blockchain venture funds.
Verifying Digital Asset Existence: Modern Audit Techniques
One of the fundamental challenges in crypto auditing is confirming asset existence and ownership. “Resources to gain confidence from an audit perspective have expanded significantly,” Vlasak explains. His team leverages SOC-validated platforms like Lukka and Otto to obtain accurate reports directly from exchanges, enabling efficient sampling and existence testing.
Exchange-Held Assets
“Confirmations remain a primary method for auditors to gain comfort with the existence of digital assets, whether confirming directly with the exchange or with the private company,” Vlasak notes. This mirrors traditional confirmation procedures but adapts to cryptocurrency infrastructure.
Wallet-Held Assets: Proving Control
For assets in self-custody wallets, auditors employ tailored procedures. Wallet addresses enable blockchain activity verification through public ledgers. API connectivity provides real-time balance snapshots for reconciliation. Most notably, auditors conduct control demonstrations: “We often set up video calls with clients to observe them logging into their wallets and transferring a small amount of tokens or coins to an exchange or other account to demonstrate control over the assets.”
This procedure has become an industry best practice, providing direct evidence of both access and ownership that would be impossible with traditional assets.
Navigating Digital Asset Valuation Standards
Valuation guidance under U.S. GAAP has remained consistent, with investment companies valuing digital assets according to ASC 820 fair value measurements. However, application requires nuanced judgment.
For exchange-traded assets with active markets, valuation typically follows closing prices from reliable sources like CoinMarketCap.com at fund-specific times. The exception: assets traded at minimal liquidity where large orders could materially impact prices. “In these instances, the fund may, at their discretion, apply a discount to the reported price,” Vlasak explains, typically ranging from 5% to 25% based on liquidity considerations.
For illiquid assets (tokens from ICOs, SAFTs, SAFEs, or governance tokens with limited trading), management must price them in good faith at the lesser of cost or fair value. Vlasak notes a structural shift: “Many more closed-end funds with SAFEs and SAFTs. Used to be more SAFTs focus, now SAFEs and C-Corp,” reflecting crypto venture capital’s evolution toward traditional startup financing structures.
Understanding Audit Opinion Types
Many emerging managers don’t fully understand audit opinions, yet this knowledge is critical for institutional fundraising.
Unqualified Opinions: The Gold Standard
“An unqualified opinion is highly valued by investors because it indicates the company is financially transparent and trustworthy,” Vlasak explains. “Essentially, an unqualified opinion states that the auditor believes the financial statements are presented fairly in all material respects.” This is often a prerequisite for institutional consideration.
Qualified Opinions: Red Flags for Allocators
Qualified opinions arise when auditors believe statements are fairly presented except for specific issues, perhaps non-compliant valuation methods or insufficient evidence for certain investments. Even qualified opinions can significantly impair fundraising, as many allocators have strict policies against investing without clean audits.
Emphasis of Matter: Important but Not Disqualifying
“An emphasis of matter does not indicate that there is a problem with the financial statements,” Vlasak clarifies. “Instead, it draws attention to something important disclosed in the notes” – such as accounting changes or significant uncertainties. Importantly, the opinion remains unqualified; the auditor simply ensures users don’t overlook key disclosures.
Tax Landscape: Evolving Guidance and Hidden Opportunities
“Crypto tax guidance is still evolving, and tax professionals are seeking more specific guidance from the IRS,” Vlasak notes. Recent developments include finalized 1099 reporting requirements and clarification that unrealized gains on digital asset holdings for certain corporations won’t be subject to Corporate Alternative Minimum Tax (CAMT).
The IRA Opportunity
One overlooked strategy: accepting IRA contributions. “We find that many crypto asset managers are unaware that they can bring in IRA money, a strategy worth considering,” Vlasak observes. Individual Retirement Accounts can invest in cryptocurrency funds through self-directed structures, opening substantial retirement capital pools. For investors, gains grow tax-deferred or tax-free; for managers, it’s a differentiated, less-competitive capital source. For more details on this, leverage our resource, Crypto In-Kind Contributions.
Anticipated Clarity
Industry participants hope upcoming congressional actions will provide de minimis exceptions for small transactions, clarify staking and mining reward treatment, and include digital assets in safe harbors to formally exempt crypto investment income from being classified as effectively connected income. This would be critical for offshore structures and non-U.S. investors.
The Capital Raising Environment: Institutional Appetite Accelerates
Perhaps the most striking shift: institutional appetite has exploded. “There is a much bigger appetite for crypto investment and capital raising now than there was 5 years ago,” Vlasak observes. “Traditional funds and RIAs are adding digital assets arms to their business to get exposure, or leveraging the prime broker they work with to access some of the major coins.”
Conferences and educational events now center on crypto strategies. “It is often discussed in media and news on a global scale, creating greater appetite and awareness.” This mainstream coverage, combined with pro-crypto regulatory signals from U.S. leadership, has accelerated adoption.
As institutional interest grows, operational standards have risen substantially. Allocators expect the same standards applied to traditional hedge funds: audited statements from PCAOB-registered firms, institutional custody, comprehensive ODD documentation, clear policies, and experienced management teams. Managers who invest in operational capabilities position themselves to capture institutional flows; those who maintain crypto-native standards while neglecting institutional requirements risk being left behind.
Key Takeaways for Fund Managers
The crypto industry has moved beyond its “Wild West” origins. Success today requires combining crypto-native expertise with traditional financial rigor. Based on Richey May’s experience auditing hundreds of digital asset funds, several practices separate institutional-ready managers from the rest:
- Maintain comprehensive documentation for all transactions, valuations, and wallet activity
- Use qualified custodians where possible; implement robust multi-sig and key management for self-custody
- Establish formal valuation governance with pricing committees and documented methodologies
- Make timely tax elections and consider IRA eligibility for your investor base
- Select service providers with deep digital asset expertise
- Design operations with audit requirements in mind from inception
This professionalization isn’t a burden; it’s an opportunity. Managers who embrace institutional standards access larger capital pools, command better terms, build sustainable businesses, and survive market cycles.
As Vlasak’s insights make clear, the transformation from bootstrapped ventures to professionally audited investment vehicles has created the foundation for sustainable growth and mainstream adoption. The next decade belongs to managers who recognize that operational excellence and audit readiness aren’t constraints but rather competitive advantages.
Want the complete conversation? Download the full Fund Outlook Magazine 4Q25 for Steve Vlasak’s complete interview plus insights from leading fund managers, strategists, and infrastructure providers across the digital asset ecosystem.
For questions about digital asset auditing or Richey May’s services, contact Steve Vlasak at svlasak@richeymay.com.
About Richey May: Founded over 40 years ago, Richey May conducts over 1,500 audits annually serving alternative investment funds from $1M to $10B+ AUM. The firm combines national firm expertise with boutique service, offering audit, tax, and advisory services across all fund strategies including cryptocurrency, hedge funds, private equity, and venture capital.
About Crypto Insights Group: Crypto Insights Group connects liquid digital asset funds with institutional allocators through data-driven analytics, operational diligence tools, and standardized benchmarking. CIG helps allocators make confident decisions and managers meet institutional standards.
