Closing the Trust Gap in Crypto Markets

The rapid expansion of the digital asset sector (particularly in stablecoins) has occurred largely in the absence of regulated assurance systems. Unlike traditional financial markets, where financial representations must be validated by independent professionals under standardized frameworks, crypto asset markets have evolved without external validation of key claims such as reserve sufficiency, custodial segregation, or solvency mechanics. This structural omission has contributed to repeated failures, undermining investor confidence and destabilizing core digital financial infrastructure.

Major Failures Illustrating the Trust Gap

TerraUSD (UST) Collapse (2022) TerraUSD (UST), a leading algorithmic stablecoin prior to May 2022, lost its peg and collapsed within 72 hours, erasing over $40 billion in combined market capitalization across UST and its associated governance token LUNA. The token’s mechanism relied on algorithmic supply control rather than hard collateral. Its peg logic was never independently audited, stress-tested, or attested by a professional third party.

• The “death spiral” risk, where falling confidence leads to redemptions, which further collapse price, was embedded in the model but not disclosed or independently modeled.
• The lack of a formal attestation process meant that investors had no verifiable means of evaluating systemic risk prior to the collapse.
• Institutional actors exposed to UST on lending platforms, derivatives markets, or liquidity pools were unable to perform reserve or solvency analysis based on standardized disclosures.

FTX-Linked Asset Failures (2022-2023)

The collapse of FTX revealed a parallel breakdown in custodial controls and asset reserve reporting. Multiple digital assets issued or supported by the FTX ecosystem, including exchange tokens and synthetic stablecoins, were transacted across wallets and platforms without formal reserve confirmation.

• Post-collapse forensic audits showed that assets were re-hypothecated between FTX, Alameda Research, and affiliated entities.
• There was no segregation of customer funds, no custodial attestation, and no chain-of-custody audit trail for issued tokens.
• Investors, counterparties, and regulators were unaware of the scope of risk exposure due to a lack of professional attestation infrastructure.

These failures exposed a systemic information asymmetry. Retail and institutional investors lacked access to independently verified data on asset solvency, custody controls, and redemption mechanics. This lack of verifiability contributed to liquidity collapse, contagion effects across trading platforms, and prolonged regulatory paralysis.

AICPA Framework: Addressing the Deficiency

The AICPA’s June 2025 exposure draft proposes a profession-led response to the core informational void in stablecoin markets. By formalizing the conditions under which CPA firms can verify key financial and operational representations, the framework introduces an assurance pathway for market normalization.

Independent verification

• Monthly attestation procedures for reserve sufficiency and custodial segregation transfer the burden of proof from users to issuers.
• CPA firms apply repeatable procedures to evaluate token-to-asset parity, access control enforcement, and liquidity coverage.
• The result is an objective data layer supporting stablecoin solvency assessments independent of issuer marketing or discretionary disclosure.

Standardization across issuers

• The framework defines core assurance domains: reserve verification, segregation protocols, collateral disclosure, smart contract review, and operational traceability.
• These domains are designed to be applied consistently across issuers, enabling apples-to-apples comparison of risk profiles.
• Standardization introduces market pressure for operational discipline, incentivizing issuers to conform to higher assurance expectations.

Compatibility with market and regulatory systems

• The framework does not replace market dynamics or dictate product design. It allows attestation of diverse issuance models as long as underlying representations are testable.
• Assurance can be integrated into market access requirements, custody eligibility standards, and investor due diligence workflows.
• The procedures align with emerging global regulatory principles, including those set by the Financial Stability Board (FSB), IOSCO, and MiCA, making the framework viable in both voluntary and compliance contexts.

Implications for Market Trust

Investor protection Third-party attestation gives investors (retail and institutional alike) access to validated information on a stablecoin’s backing, custody, and operations. This reduces reliance on unaudited claims and increases the visibility of systemic vulnerabilities before they manifest.

Market discipline Issuers aware that their reserve structure and internal controls will be subjected to professional scrutiny are more likely to maintain operational rigor. Discretionary reserve composition, co-mingled accounts, or ambiguous redemption mechanics become harder to sustain under formalized attestation.

Regulatory readiness As regulators move toward statutory frameworks for digital asset oversight, the AICPA structure provides a ready-made assurance model for integration. Its modular design and professional alignment allow for straightforward adoption into legal requirements without creating new standards from scratch.

The AICPA framework closes the structural assurance gap that has defined the digital asset sector since inception. By embedding CPA-led attestation into the financial architecture of stablecoins, the framework enables a shift from discretionary transparency to institutional accountability. It transforms solvency from a claim into a verifiable condition (measurable, repeatable, and professionally attested) laying the groundwork for a more stable, trustworthy, and regulatory-compatible digital financial system as of June 2025.

Assurance as market infrastructure

The AICPA’s attestation framework formalizes assurance as an essential layer of digital asset infrastructure. Rather than treating attestation as a static compliance obligation, the framework positions it as a dynamic tool for market coordination, financial comparability, and systemic risk mitigation. In the context of stablecoins, where price stability is assumed but not always proven, regulated attestation introduces a foundation of verifiability that supports institutional participation and market integration. As of June 2025, this marks a structural shift in how trust is engineered and maintained across tokenized financial systems.

Standardization and comparability

Prior to the introduction of formal attestation procedures, each stablecoin issuer defined reserve sufficiency, custodial safeguards, and redemption logic according to internal discretion. Disclosure formats varied widely: some issuers published daily reserve snapshots without audit, others released quarterly summaries with minimal detail, and many disclosed nothing at all beyond public claims. The result was a fragmented market with little interoperability between due diligence processes and limited confidence in comparative risk evaluation.

The AICPA framework introduces uniform procedural categories:

• Reserve composition is verified through third-party attestation using standardized reconciliation and confirmation methods.
• Redemption mechanics are evaluated for operational feasibility and procedural consistency, including segregation enforcement and liquidity ladders.
• Issuance controls and smart contract governance are subject to code-level review under structured access, versioning, and logic testing procedures.

With this standardization, institutional investors can benchmark stablecoin issuers using consistent criteria. Attestation transforms issuer-specific claims into testable, comparable financial representations. Asset managers, banks, and exchanges can evaluate stablecoins on documented professional review. The cost and complexity of due diligence decline, while the accuracy of risk modeling improves.

Risk-Weighting and Institutional Participation

Regulated financial institutions depend on standardized risk classifications to determine asset eligibility for custody, collateral, and exposure management. Without external assurance, stablecoins cannot be reliably modeled for credit, liquidity, or operational risk. The introduction of CPA-issued attestation reports changes this.

• Reserve sufficiency and redemption probability can now be modeled as quantifiable, independently validated variables.
• Operational resilience, including redemption throughput, custodial redundancy, and failure recovery, can be referenced against tested controls.
• Regulatory reporting gains support from attestation outputs that meet documentation standards for internal risk policy compliance and external regulatory audits.

This structure facilitates the onboarding of attested stablecoins into institutional service environments. Custodians can accept tokens with verified backing. Lenders can calculate haircuts based on attested liquidity conditions. Clearing houses can treat stablecoins as eligible collateral based on CPA-documented issuance and redemption logic. Risk-weighting, which previously relied on issuer reputation or informal trust, gains objective input.

Access for Fiduciary Asset Managers

Public asset managers, pension funds, and sovereign investment entities operate under fiduciary mandates that require asset selection based on transparent, auditable criteria. In traditional finance, this standard excludes unaudited or informally governed assets from consideration. Stablecoins backed only by self-reported data are incompatible with fiduciary portfolios, regardless of yield or volume.

Attestation provides a pathway to minimum assurance compliance:

• Monthly reserve verification offers an evidence-based alternative to full audit for issuers unable or unwilling to undergo annual financial review.
• Segregation protocols and redemption pathways, if attested by a licensed CPA firm, satisfy baseline standards for custody qualification and collateral eligibility.
• Smart contract validation, as part of attestation, supports risk analysis for tokenized settlement tools in derivatives, payments, or cross-border lending.

For these institutions, attestation acts as a gatekeeper. Without it, stablecoins remain outside the perimeter of qualified investment. With it, they can be considered for selective, rules-based integration.

Transition to Verifiability-Driven Adoption

Digital asset markets are undergoing a shift from velocity driven by opacity to adoption driven by verifiability. In the early phases of stablecoin growth, market share was driven by network effects, informal trust, and exchange volume. These conditions prioritized speed over reliability and allowed opaque issuers to dominate liquidity layers despite limited transparency.

Under the attestation model:

• Assets backed by attested reserves and operational controls become differentiated from unaudited alternatives.
• Liquidity is reallocated based on evidence, not perception, favoring issuers that provide repeatable, professional validation.
• Market participation becomes conditional on assurance, as counterparties demand documented solvency, custody, and issuance protocols.

This shift changes the incentive structure for issuers. Attestation becomes a strategic advantage, unlocking access to institutional flows, custody integration, and regulatory credibility. Verifiability becomes the basis for trust, replacing informal assurances with certified representations.

Integration with Broader Financial Systems

Stablecoins, if structured and governed under assurance regimes, become interoperable with the risk management systems of banks, exchanges, and payment processors. Integration with macro-financial systems (including central bank settlement pilots, tokenized asset platforms, and cross-border remittance rails) requires digital assets to conform to the same operational discipline as traditional financial instruments.

As of June 2025:

• Regulators in the U.S. and EU are actively considering attestation as a precondition for stablecoin market access, custody eligibility, and exchange listing.
• Risk modeling by clearinghouses and banks incorporates attestation status as a binary indicator of eligibility for margin treatment and liquidity provisioning.
• Institutional onboarding requirements increasingly mandate third-party assurance, transforming what was once optional into expected market infrastructure.

In this context, assurance is no longer an enhancement. It is a structural requirement, analogous to credit ratings for bonds or collateral haircuts in repo markets. Its normalization reflects the maturing expectations of digital finance.

Embedding assurance into the operations of stablecoin issuers aligns the sector with the standards of institutional finance. It facilitates transparency without requiring uniform business models, allowing issuers to differentiate while still operating within verifiable parameters. As this assurance becomes a standard condition of participation, stablecoins gain credibility as structured financial instruments suitable for integration into the architecture of global markets.