SEC Warns Crypto Vaults May Fall Under Securities Laws With Human Discretion Involved
SEC member Hester Peirce has warned that certain crypto vaults and decentralized lending strategies may fall under U.S. securities regulation when managers control investment decisions, interest rates or risk settings.
In a statement on July 22, Peirce emphasized that blockchain technology does not change the legal character of an underlying financial activity, saying '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.'
Peirce specifically highlighted that vaults with human discretion in investment decisions or interest rates may be considered investment contracts and subject to SEC oversight.
The SEC member also noted that certain loans could resemble notes classified as securities, depending on their design, operations, and level of human discretion.
Despite the warning, parts of the decentralized finance industry welcomed Peirce's invitation to engage with the SEC about compliant structures, seeing it as a constructive signal for innovation while preserving investor protection and orderly markets.