CFP Board Releases Fresh Guidance for Advisors on Cryptocurrency

Cryptocurrency has exploded onto the financial scene, necessitating certified financial planners (CFPs) to expand their competence in this emerging area. To address this need, the CFP Board recently published new guidance for CFP professionals providing cryptocurrency advice. This article will explore the principles and responsibilities laid out in this essential guidance.


As cryptocurrencies like Bitcoin and Ethereum gain mainstream traction, investors are increasingly turning to financial advisors for guidance on integrating crypto into portfolios. However, the unique complexities of cryptocurrency demand advisors develop specialized knowledge and skills.

To equip CFP professionals for this new paradigm, the CFP Board has issued comprehensive guidance around crypto competency, regulatory compliance, ethical duty, and client communication absorbed and applied by all financial planners seeking to advise on cryptocurrency investments.

Understanding Cryptocurrency

Cryptocurrency refers to digital or virtual currencies secured through cryptography. Bitcoin, launched in 2009, was the first decentralized cryptocurrency, built on blockchain technology which provides transparency and security. There are now over 20,000 cryptocurrencies like Ethereum, Litecoin, and Ripple.

The total crypto market cap exploded from $7 billion in 2016 to over $3 trillion in 2021. Cryptocurrency has transitioned from an obscure novelty to a major financial sector. This meteoric rise has prompted growing client interest in crypto advice.

The Role of CFP Professionals

Certified financial planners are entrusted with guiding clients’ financial lives holistically. As crypto integrates with mainstream finance, CFP professionals must expand their competencies to serve client needs related to cryptocurrency.

This requires educating oneself on cryptocurrency mechanics, evolving regulations, portfolio allocations, risk management, security protocols, and tax implications. CFPs must also communicate crypto complexities to clients clearly.

Developing Competence in Cryptocurrencies

According to the CFP Board, advisors must develop proficiency on topics like:

  • How cryptocurrencies and blockchain technology work
  • The evolving regulatory landscape around crypto
  • Tax considerations, reporting requirements, and implications of crypto investments
  • Volatility management and risk mitigation strategies
  • Secure storage solutions like cold wallets and multi-signature protocols

Competence enables planners to create customized crypto integration plans aligned to each client’s financial objectives and risk tolerance.

Providing Crypto Advice Carefully

While an innovative asset class, cryptocurrency also carries substantial risk due to high volatility and lack of regulatory oversight. CFPs should take care to:

  • Analyze clients’ risk appetites and time horizons before recommending crypto
  • Limit crypto allocations to less than 5% of portfolios for most retail investors
  • Emphasize long-term holding over speculative trading
  • Avoid hype or downplay the extreme price swings associated with crypto
  • Customize advice to each client’s financial situation

Additional Duties of Crypto Advisory

The CFP Board notes cryptocurrency may create additional advisor responsibilities around:

Custody and Security

Unlike assets held by broker-dealers or custodians, advisors may effectively have custody of crypto assets through access to clients’ private keys. Planners must institute controls like audit trails to track transactions.


The lack of consistent standards for crypto valuation creates challenges. CFPs should use clear, logical methodologies tailored to each asset.


More frequent account monitoring may be necessary given crypto’s volatility. Advisors must regularly assess holdings to identify needed portfolio changes.

New Guidance from the CFP Board

In September 2022, the CFP Board published extensive new guidance around:

  • Crypto-related competencies needed to fulfill client duties
  • Providing advice in a compliant, ethical manner
  • Communicating risks and uncertainties associated with crypto

This groundbreaking guidance provides clear directives for planners navigating crypto assets. It reaffirms putting clients’ interests first.

Compliance Considerations

Regulations around crypto remain in flux but planners must keep current on requirements like:

  • IRS reporting of crypto transactions and tax implications
  • CFTC regulations for crypto derivatives and commodities
  • SEC guidance on securities law treatment of different crypto assets
  • State laws governing crypto transactions and licensing

Regular review of evolving oversight is essential to ensure full compliance. The SEC’s recent scrutiny of crypto companies highlights the necessity of keeping abreast of new developments.

Debunking Crypto Myths

The CFP Board warns against misconceptions like:

  • Myth: Cryptocurrency is untraceable
  • Fact: Blockchain ledger provides transaction transparency
  • Myth: Crypto is not subject to taxation
  • Fact: Cryptocurrency triggers capital gains and losses

By dispelling such myths, CFPs can have realistic discussions about crypto’s risks and responsibilities.

Strategies for Effective Crypto Advisory

When advising on crypto, CFPs should:

  • Research how adding crypto may help diversify portfolios
  • Stress the importance of secure storage through cold wallets and multi-signature protocols
  • Caution against speculative crypto trading
  • Develop plans for systematically taking some profits during market spikes
  • Rebalance periodically according to target crypto allocation

Real-World Examples

John, 68, held a speculative 5% Bitcoin position. His CFP helped him institute a collar strategy to lock in gains after a surge.

Mary, 45, wanted crypto exposure. Her CFP guided her to lower-risk blockchain stocks instead of direct Bitcoin ownership.

Security and Privacy Considerations

CFPs must understand crypto risks like:

  • Lost private keys rendering assets inaccessible
  • Hacks of insecure third-party custodial wallets
  • Transaction risks on unregulated exchanges

Advisors should guide clients on multi-factor authentication, cold storage, and other security protocols to mitigate these risks.

Navigating Crypto-Related Taxes

CFPs must stay current on evolving tax laws for:

  • Classifying crypto (capital asset, commodity, security, etc)
  • Cryptocurrency airdrops and forks
  • Bounties and mining fees
  • Charitable donations
  • Reporting requirements and forms

Thorough understanding allows proper compliance and managing of tax liabilities.

Monitoring and Reporting

Given crypto volatility, planners must implement robust monitoring such as:

  • Tracking basis cost across wallets
  • Monitoring market events affecting holdings
  • Performance reporting tailored to crypto assets

Ongoing monitoring ensures portfolios remain aligned to client goals.

Keeping Current on Crypto Trends

To serve clients well, CFPs must continuously update their crypto knowledge by:

  • Reading latest crypto news, regulations, and analyses
  • Following thought leaders, organizations, and ethical companies in the space
  • Participating in educational events on crypto finance

Ongoing learning enables planners to give sophisticated, effective guidance.

Ethical Considerations

In crypto’s “Wild West,” CFPs should:

  • Commit to the ethical standards and client-first principles governing traditional finance
  • Avoid any appearance of manipulating clients for self-interest
  • Never recommend inappropriate crypto investments to generate commissions
  • Be transparent about advisor competency limitations in pioneering areas

CFP Certification Signifies Crypto Capability

The knowledge required for CFP certification equips planners to apply core financial planning and investment principles to cryptocurrency. CFP professionals inspire confidence by demonstrating crypto competence.


Cryptocurrency represents an integral, transformative new component of finance. By following the CFP Board’s comprehensive guidance around competency, ethics, compliance, and client communication, CFP professionals can effectively incorporate crypto into their advisory services while skillfully managing risks and responsibilities.


Are crypto donations deductible? Yes, if held over one year. Otherwise subject to income tax rates.

Can advisor fees be paid in crypto? Yes, but consist valuation methods must be applied.

How are crypto gifts and inheritances taxed? Same as gifts of traditional property based on value at time of transfer.

What crypto activities trigger registration? Acting as a broker, dealer or custodian of crypto assets may require licensing.

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