When it comes to vetting crypto projects, the statistics are sobering: according to Chainalysis, in 2024 more than $1.7 billion was lost by investors due to unscrupulous or technically vulnerable blockchain startups. Even more telling: about 70% of cryptocurrency listing applications on major exchanges are rejected precisely because of errors or inconsistencies discovered during the Due Diligence stage. Why do so many promising projects fail the review despite innovative ideas and strong teams?
In reality, a comprehensive review of blockchain projects is not just a formality but a strategic tool for protecting investments and increasing the chances of a successful listing. Due diligence for crypto projects allows you to identify legal, financial, and technical risks, assess the transparency of tokenomics, verify the legality of operations, and ensure compliance with international standards. For teams, it is an opportunity to demonstrate business maturity; for investors, to reduce the likelihood of losing funds; and for exchanges, to ensure the security of the ecosystem.
At COREDO we encounter cases every day where properly conducted due diligence becomes the decisive factor for a project’s entry into the global market. I invite you to read the article to the end: here you will find practical recommendations, strategic ideas, and checklists that will help you pass due diligence for a crypto project as effectively as possible – from preparing documents to assessing risks and interacting with exchanges.
Main stages of cryptocurrency project due diligence
The main stages and process of checking cryptocurrency projects (due diligence) imply a phased and systematic assessment of all key aspects of a project to reduce risks and enable informed decisions. From the outset it is important to clearly define the objectives of the review and prepare for each subsequent stage in order to identify weaknesses of the cryptocurrency project and assess its real potential.
Setting objectives and preparing for due diligence
Due diligence for crypto projects begins with a clear formulation of goals: determine legal compliance, assess financial stability, identify technical risks and prepare the project for listing or an investment round. In practice COREDO has shown that setting KPIs and a timeline for the review significantly speeds up the process and makes it transparent for all parties.
The terms of reference should include a list of aspects for analysis: corporate structure, tokenomics, smart contracts, sources of financing, KYC/AML mechanisms. It is important to select a team of experts with experience in international jurisdictions: as implemented by COREDO when working with projects for the EU, Singapore, Dubai and the United Kingdom.
Gathering and organizing documents
An effective comprehensive review of blockchain projects is impossible without proper organization of an electronic data room. The solution developed by COREDO allows documents to be structured by category: charter, corporate agreements, licenses, whitepaper, roadmap, financial reporting, smart contract audit reports.
Key documents for due diligence of a crypto project:
- Charter, corporate agreements, ownership structure
- Financial statements, bank statements, project budget
- Whitepaper, technical documentation, description of tokenomics and vesting mechanisms
- Licenses for cryptocurrency operations, confirmation of AML/KYC compliance
- Roadmap, reports on MVP implementation, test protocols
Legal audit of a crypto project
Important aspects of legal review:
- Analysis of the legal structure of the crypto issuer and ownership structure
- Review of corporate agreements, shareholder agreements, presence of offshore elements
- Assessment of the token’s status: whether it is classified as a security according to the Howey Test, MiCA, SEC or FCA
- Sanctions screening of crypto projects through international databases, analysis of political connections and reputation
- Checking KYC/AML procedures for token sale participants: compliance with FATF, EU, MAS (Singapore) and other standards
The solution developed by COREDO integrates automated tools for verification against government registries, which minimizes the human factor and speeds up the audit.
Financial review and risk assessment
A financial review of a blockchain startup includes analysis of inflows and outflows, assessment of the fair price of the token, scenario modeling and identification of critical risks. COREDO’s experience confirms that scenario analysis of crypto projects enables investors to make decisions based on objective data rather than just marketing forecasts.
Key steps of financial due diligence:
- Analysis of financial flows: sources of revenue, expenses, budget structure
- Assessment of financial stability: adequacy of reserves, balance sheet transparency, absence of hidden liabilities
- Scenario modeling: calculation of worst-case and best-case scenarios, risk matrix
- Verification of funding sources: legality, transparency, absence of sanctions restrictions
- Preparation of a risk report and strategies for their mitigation (insurance, reserving, diversification)
At COREDO we use international standards of financial audit, which allows adapting the review to the requirements of the EU, Singapore, Dubai and other jurisdictions.
Technical audit and smart contract review
Technical due diligence includes:
- Smart contract audit: security review, vulnerability testing, execution logic analysis
- Validation of the MVP and the working protocol: confirmation of the presence of a working product, not just a concept
- Technical integration of cryptocurrencies on exchanges: compliance with API standards, configuration of trading pairs, ensuring compatibility
- Assessment of the blockchain solution architecture: scalability, fault tolerance, compliance with security standards (ISO, OWASP)
The COREDO team uses independent technical auditors and automated tools for testing smart contracts, which allows identifying risks at an early stage and correcting the project’s architecture before market launch.
How to pass due diligence for a cryptocurrency listing
Preparing for listing: requirements and documents
Main requirements:
- Whitepaper with a detailed description of the technology, tokenomics, team, and roadmap
- Documents confirming legal compliance: charter, licenses, corporate agreements
- Information about the team: biographies, experience, public profiles, proof of qualifications
- Tokenomics setup: vesting mechanism, token distribution, holders’ rights, inflationary and burn mechanisms
- Reports on technical audits, smart contract testing, confirmation of an MVP
Common mistakes and how to avoid them
Mistakes in documentation are one of the main reasons for rejection when listing a cryptocurrency. In COREDO’s practice, the most common are:
- Mismatch of information between the whitepaper, roadmap and the actual state of affairs
- Insufficient tokenomics detail: lack of a vesting mechanism, unclear token distribution
- Gaps in legal documents: missing licenses, outdated corporate agreements
- Smart contract vulnerabilities: no audit performed, logical errors found
- Lack of transparency in financial flows: unclear funding sources, no reporting
Sanctions screening before listing
Key steps:
- Check for matches against international sanctions lists (OFAC, EU, UN)
- Analysis of differences in regulatory requirements across jurisdictions: MiCA (EU), MAS (Singapore), FCA (United Kingdom), DFSA (Dubai)
- Conducting KYC procedures/AML for token sale participants: collection and verification of data, checking sources of income, documenting good faith
- Execution of NDAs and confidentiality agreements to protect confidential information
COREDO’s solution for automating sanctions screening and integrating with international databases minimizes risks and speeds up the listing process.
Assessment of the team and governance of a crypto project
Analysis of the team’s qualifications and reputation
Important aspects:
- Verification of founders’ experience in the blockchain industry: completed projects, publications, participation in industry events
- Checking conflicts of interest: transparency of governance structure, presence of independent directors
- Analysis of corporate agreements: role distribution, rights and responsibilities of participants, dispute resolution mechanisms
At COREDO we use international databases and industry rankings to objectively assess the team’s reputation.
How to evaluate community activity?
Metrics of crypto community activity and a project’s reputation in the crypto community are an important indicator of a startup’s prospects. COREDO’s solution for analyzing social networks and marketing campaigns makes it possible to distinguish organic growth from artificial.
Key metrics:
- Community size and activity: number of members, discussion frequency, engagement
- Organic growth vs artificial: analysis of dynamics, detection of bots and fake accounts
- Project reputation: reviews in industry media, participation in relevant events
- Quality of marketing strategy: transparency of communications, interaction with investors, availability of educational content
Key Steps of Due Diligence
- Forming a working group and setting the review objectives
- Collecting and structuring documents in an electronic data room
- Conducting preliminary legal, financial, and technical audits
- Preparing explanations and supporting information for investors and exchanges
- Preparing NDAs and non-disclosure agreements
The due diligence timeline for crypto projects, implemented by the COREDO team, usually ranges from 3 to 8 weeks depending on the complexity of the structure and jurisdictional requirements. The cost of listing a cryptocurrency on an exchange ranges from $10,000 to $250,000, including expenses for audit, legal review, and document preparation.
- Conduct an independent risk assessment with the involvement of external consultants and auditors
- Use automated tools to verify information accuracy and analyze inconsistencies
- Ensure transparency of financial flows and funding sources
- Document all decisions and stages of the review, and produce trustworthiness reports
Interaction with investors and exchanges should be built on principles of openness, transparency, and readiness for additional questions. COREDO’s experience has shown that projects prepared for due diligence in advance pass the review faster and with lower costs.
Key takeaways and steps for entrepreneurs
- Successful completion of due diligence for a crypto project requires a comprehensive approach: legal, financial and technical audits must be integrated into a single strategy.
- Transparency of processes, compliance with regulatory requirements and proper structuring of documents: the key to investors’ and exchanges’ trust.
- Due diligence helps protect investments, minimize the risk of rejection and accelerate entry into global markets.
- Checklist questions for self-assessment before starting due diligence: Are all documents prepared? Has a smart contract audit been conducted? Are corporate agreements formalized? Have funding sources and compliance with sanctions requirements been checked? Has the community activity been assessed?
Stages of due diligence and key tasks
| Due diligence stage | Key tasks | Relevant keywords |
|---|---|---|
| Preparation and setting objectives | Defining objectives, KPIs, selecting experts | due diligence for crypto projects, stages of review |
| Collection and systematization of documents | Charter, contracts, whitepaper, financial statements | what documents are needed for due diligence |
| Legal audit | Review of structure, IP, sanctions, KYC/AML | legal audit of a crypto project, sanctions check |
| Financial review | Cash flow analysis, scenario analysis, risk assessment | financial review of a blockchain startup, crypto project risks |
| Technical audit | Audit of smart contracts, MVP, integration | crypto project audit, smart contract verification |
| Preparation for listing | Tokenomics structuring, documentation, marketing | cryptocurrency listing, tokenomics requirements |
| Assessment of the team and community | Experience analysis, conflicts, community activity | team qualifications, crypto community activity metrics |
| Decision making and recommendations | Report, strategy, risk mitigation | risk report, decision making based on review results |
This article is a practical guide that reflects the many years of experience of the COREDO team in international legal and financial consulting for crypto projects. Here you will find tools, strategies and solutions that will help you pass due diligence and take your project to a new level of trust and resilience.