Crypto Vaults and Lending Strategies Face SEC Scrutiny

SEC Commissioner Hester Peirce issued a statement on July 22, warning that crypto 'vaults' and on-chain lending strategies can fall within federal securities laws. The statement emphasizes discretion as a key factor in determining whether an activity is subject to securities regulations.

The analysis focuses on who decides, rather than the specific technology used. Commissioner Peirce's statement highlights four frameworks: investment contract/common enterprise, Investment Company Act status, notes as securities under Reves, and investment adviser status.

The statement draws a clear-eyed view of where these structures sit on the programmatic-to-discretionary spectrum, with the placement driving every framework. It also encourages engagement with the Commission to address concerns and de-risk potential issues.