$131 billion crypto vault boom will test the limits of SEC’s friendlier crypto stance

On July 22, SEC Commissioner Hester Peirce warned that some crypto vaults and onchain lending strategies may fall under federal securities laws.

According to her, the regulatory risk depends on how the products are structured and who controls the investment decisions.

Crypto vaults pool customer assets into onchain strategies that generate yield through lending, staking and other activities, with some relying on professional managers to choose markets, approve collateral and set risk parameters.

Peirce did not identify any companies or suggest that existing products violate securities laws. However, her warning comes as several companies, including Bitwise, Coinbase, and Kraken, enter the rapidly expanding market.

How crypto vaults and onchain lending could fall under securities law

The legal risk for these products increases when a vault shifts from automated software to professional managers making decisions over customer assets.

Peirce said vaults can range from immutable smart contracts that follow predetermined rules to actively managed products in which curators choose lending markets, move assets between strategies and adjust risk parameters.

Larry Florio, deputy general counsel at synthetic-dollar developer Ethena Labs, said that distinction sits at the center of the regulatory question.

“Vault designs aren’t uniform,” Florio said. Software executing predetermined functions can resemble an administrative process, while people making allocation decisions introduce the type of managerial effort considered under securities law, he explained.

That distinction could determine whether some vaults qualify as investment contracts.

Peirce noted that firms that select yield opportunities, reallocate customer assets or appoint others to make those decisions should consider whether users are contributing assets to a common enterprise with an expectation of profits generated through managerial efforts.

The assets held by a vault can create additional obligations. A vehicle that owns securities or directs customer funds into securities could fall under investment-company rules.

On the other hand, a product with largely fixed portfolio could resemble a unit investment trust, while a strategy that regularly reallocates assets could look more like a managed investment company.

At the same time, products offering individualized treatment could also share characteristics with separately managed accounts, potentially raising investment-adviser questions for the firms overseeing them.

Onchain lending introduces another potential route into securities law, even when the assets being borrowed or lent are not securities themselves.

Peirce said managers who set interest rates, determine eligible collateral, establish loan-to-value ratios or control liquidation thresholds should examine whether those activities create regulatory obligations.

The loans themselves could also come under scrutiny. Depending on how they are structured, distributed and used, some could have the characteristics of notes that qualify as securities under the US Supreme Court’s framework in Reves v. Ernst & Young.

Still, none of those features automatically makes a vault or lending strategy subject to federal securities laws.

Peirce said the outcome ultimately depends on the product’s structure, underlying assets and the degree of discretion exercised by those managing it.

Onchain yield pushes deeper into mainstream finance

Those regulatory views are gaining urgency as major financial firms make onchain lending accessible to customers outside decentralized finance.

Coinbase has expanded USDC lending through Morpho, allowing eligible users to deposit the stablecoin into onchain vaults directly from its app. Customers can choose between two strategies curated by Steakhouse Financial, each with different collateral and risk profiles.

Kraken entered the market in May with a Bitcoin vault that allocates customer assets across protocols including Aave and Morpho. The product offers variable returns of up to 2.5%, paid in Bitcoin, with Veda providing the infrastructure and Sentora managing strategy design and risk.

At the same time, traditional asset managers are also adopting the model.

Bitwise, the $15 billion asset manager, launched its first onchain vault through Morpho in January. Its investment team sets collateral requirements, exposure limits and allocation rules, while customer assets remain onchain.

These products reflect growing institutional interest in a market that has expanded sharply.

Deposits in crypto vaults reached about $131 billion in April 2026, up from $24 billion three years earlier, S&P Global Ratings said. About 94% remained concentrated in crypto-native activities such as staking, crypto-backed lending and yield aggregation.

Bitwise expects assets in professionally managed vaults to double this year and has described the products as potential “ETFs 2.0.”

S&P sees a broader opportunity as more traditional assets move onto blockchains. The ratings firm said vaults could eventually perform functions associated with private credit, private equity, money market funds and hedge funds.

Crypto vaults could test the limits of the SEC’s crypto thaw

The growth of managed crypto vaults could test how far the SEC’s retreat from aggressive crypto enforcement can extend.

For much of the past 18 months, the agency has moved away from the enforcement-led approach that placed crypto lending, staking and intermediary services under sustained legal pressure.

Under former Chair Gary Gensler, the SEC sued companies including Coinbase over products it alleged involved unregistered securities. That posture shifted after President Donald Trump returned to office, with the agency creating a Crypto Task Force and pursuing a regulatory framework intended to provide clearer paths for crypto businesses.

Peirce’s latest statement does not signal a return to that earlier enforcement campaign. Instead, it draws a boundary around the SEC’s more accommodating approach as crypto firms increasingly offer products that resemble traditional lending and asset management.

“The securities laws do not apply to all crypto assets and activities,” Peirce said, but that does not mean they apply to none.

She warned firms against using “headstands, backflips, and other gymnastics” to argue that securities laws do not cover activities already within their scope. Businesses operating inside that perimeter should instead work with the SEC to find a compliant path, she said.

That distinction could become more important as professional managers take greater control over vault allocations, collateral requirements and risk parameters.

Those features may make the products more attractive to mainstream investors, but they can also make them resemble financial arrangements already governed by securities laws.

Meanwhile, Peirce’s statement carries an important limitation. It reflects the view of one commissioner rather than a Commission rule, formal agency action or staff guidance.

However, her position as head of the SEC’s Crypto Task Force nevertheless gives the intervention added weight. The task force has been charged with clarifying regulatory boundaries, developing workable registration paths and helping shape the agency’s approach to crypto enforcement.

Peirce also left room for the regulatory framework itself to change. She said the SEC must respect limits imposed by Congress and invited firms to engage with the agency when existing securities rules unnecessarily impede new technology or protect incumbent financial structures.

Florio described that approach as “an invitation, not a threat,” pointing to Peirce’s willingness to discuss whether existing rules should be adapted for onchain finance.

But that invitation does not remove the legal boundary she identified. Vault operators that fall within federal securities laws could still face registration, disclosure, or investment-adviser requirements, while other structures may remain outside SEC oversight or qualify for exemptions.

That leaves the emerging vault market in a markedly friendlier regulatory environment than crypto lenders faced several years ago, but not an unrestricted one.