Crypto Vaults and Onchain Lending May Still Trigger Federal Securities Laws

SEC Commissioner Hester Peirce recently issued a statement warning that crypto vaults and onchain lending strategies may still trigger federal securities laws, despite some recent clarity from the SEC. According to Peirce, these activities can be subject to securities laws depending on their specific facts and circumstances.

Pierce noted that crypto vaults use smart contracts to allocate users' assets to yield-generating activities such as staking and lending, but cautioned that this does not exempt them from federal securities laws. She described vaults as falling along a spectrum, ranging from allocations determined solely by immutable smart contracts to allocations made at the discretion of another person or group.

Pierce also pointed out that onchain lending strategies can bear the 'hallmarks of notes that are securities' depending on factors such as parties' motivations and plans for distribution. She emphasized that managing vaults and lending strategies may implicate investment adviser issues, and that any SEC analysis requires respecting Congress's limits on jurisdiction while protecting developers' free speech rights.