The U.S. Securities and Exchange Commission (SEC) has cautioned that crypto vaults and onchain lending strategies may fall under federal securities laws.
Some of the industry's fastest-growing yield-generating products could face regulatory scrutiny depending on how they are structured.
SEC Commissioner Hester Peirce said that the fact that many crypto assets and activities do not fall within the agency's jurisdiction, that does not exempt all decentralized finance (DeFi) products from securities regulations.
Vault design importance
Crypto vaults have become increasingly popular as automated tools that allow users to earn yield on digital assets through activities such as staking, lending, and other onchain strategies.
According to Peirce, these vaults vary significantly in design. Some rely entirely on immutable smart contracts to allocate user assets, while others involve active management by individuals or teams who determine how funds are deployed.
She warned that where human discretion plays a meaningful role participants should assess whether their activities fall within the scope of federal securities laws.
Peirce stressed that simply moving investment activities onto blockchain networks does not remove them from existing securities regulations.
"Moving activities that fall within the scope of the federal securities laws onchain, as a general matter, does not take those activities outside the scope of the laws the Commission administers," she wrote.
Lending protocols are also under review
The statement also addressed crypto lending strategies, where users deposit digital assets into onchain protocols that lend them to borrowers in exchange for fees.
Peirce noted that parties responsible for setting interest rates, choosing supported assets, determining loan-to-value ratios, or establishing liquidation thresholds should likewise evaluate whether their roles trigger securities law obligations.
She added that certain onchain loans could resemble securities under existing legal standards, depending on factors such as how they are distributed and the motivations of participants.
