Pierce Warns Crypto Vaults May Be Securities Under SEC Rules

SEC Commissioner Hester Peirce recently cautioned that some crypto vaults and onchain lending products may be subject to U.S. securities laws, depending on their structure and management.

In a statement on July 22, Peirce emphasized that blockchain technology does not exempt financial activities from federal regulation. 'Moving activities that fall within the scope of the federal securities laws onchain does not take those activities outside the scope of the laws the Commission administers,' she said.

Pierce's warning applies to vaults and lending protocols where managers control investment decisions, interest rates or risk settings. These products may be considered investment contracts if users expect profits from managerial efforts, according to Peirce.

Decentralized finance (DeFi) firms like Morpho may need to redesign some managed yield products in light of Pierce's warning.