Peirce: Crypto vaults and on-chain loans could be securities

SEC Commissioner Hester Peirce issued guidance Wednesday saying certain crypto vaults and on-chain lending products that actively manage user funds could fall under U.S. federal securities laws. She urged developers and operators to review whether their offerings require regulatory compliance.

The guidance targets products that make discretionary decisions about user assets, such as choosing where to allocate funds, selecting yield strategies, setting lending terms or determining liquidation thresholds. Whether a product is subject to securities law depends on its structure and how managers operate.

Peirce noted some vaults could be treated as securities offerings or as investment companies. She added that parties who manage allocations or set lending parameters may trigger investment-adviser obligations under existing law.

“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,” Peirce wrote.

The commissioner invited developers to consult the SEC if they believe a product may fall within the agency’s jurisdiction and requested feedback on how current rules might better accommodate on-chain finance.

Use of on-chain vaults has expanded this year as firms package automated DeFi strategies into consumer-facing products. Examples include platforms that let users compare vaults by strategy and risk, messaging apps that offer self-custodial crypto vaults that generate yield without moving assets to a central custodian, and exchange-backed vaults that deploy wrapped Bitcoin into decentralized lending markets.

These products expose users to technical and operational risks. In December, a decentralized finance protocol reported an exploit that led to roughly $9 million in losses tied to a legacy yield vault. If regulators classify vaults as securities, operators could need to register with the SEC or qualify for exemptions and comply with disclosure, reporting and other regulatory requirements.

Peirce’s guidance applies to offerings in the United States and emphasizes that placing financial activities on a blockchain does not automatically remove them from SEC oversight. Developers and service providers should assess product design, governance and disclosures in light of those rules.