SEC's Peirce Says Some DeFi Vaults, Lending Strategies May Be Subject to Securities Laws

In a statement published on 22 Jul, Commissioner Hester Peirce, who is widely regarded as the most knowledgeable and crypto-friendly of the SEC's commissioners, said moving financial services onto a blockchain does not mean federal securities laws no longer apply. She added that people who design or manage crypto vaults and lending strategies should consider whether those laws apply to their activities. 

Crypto vaults are automated investment products that let users deposit digital assets, which are then allocated across strategies such as lending or staking to generate returns.

"If you do headstands, backflips, and other gymnastics to read the law so that it does not apply to crypto assets and activities that are well within the scope of the federal securities laws, you will have a painful fall," the statement reads. 

Notably, the statement does not create new rules or change existing securities laws but offers Peirce's views. But given the commissioner's long-standing support of the industry and advocacy for a clear regulatory framework for crypto, her opinions carry outsized influence. 

The commissioner's comments come as DeFi platforms continue to roll out more advanced lending and yield products. On 21 Jul, lending protocol Morpho launched a separate fixed-rate lending protocol that lets borrowers and lenders agree on interest rates and loan terms before a loan is issued onchain.

Peirce's statement also comes as lawmakers continue to debate the CLARITY Act – a bill which would establish a clearer regulatory framework for digital assets by defining when they are overseen by the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC).

Vaults and lending

Peirce, who leads the SEC's Crypto Task Force and is sometimes affectionately referred to in the industry as "Crypto Mom", described crypto vaults as pooled investment products that automatically put users' digital assets to work through blockchain-based activities.

Supporters of vaults find them useful because, instead of having to move their crypto between different DeFi services themselves, they can deposit it into a vault, which automatically manages those steps to earn a return.

Morpho – the second-largest DeFi lending protocol by total value locked – currently holds about $4.7bn in vault deposits and accounts for 81% of vault deposits across lending protocols, according to data from Token Terminal.

However, whether a vault or lending strategy falls under federal securities laws depends on how it is structured and operated, Peirce said. 

"Vaults are not uniform," she added. "They fall along a spectrum from programmatic allocations determined solely by immutable smart contracts, to allocations at the sole discretion of another person or group of persons. This description is purposefully broad and generic."

Growing DeFi focus

Crypto-focused platforms, including protocols and exchanges, have been increasingly using vaults to offer lending and other ways for users to earn returns. Total deposits in onchain vaults reached about $131bn as of April, up from $24bn in April 2023, according to the Crypto Council for Innovation, which cited S&P Global research.

The growth has also prompted calls for clearer rules. In June, the Crypto Council for Innovation formed a coalition of digital asset firms to push for greater regulatory clarity around crypto vaults.

At the same time, Peirce said the SEC has spent much of the past year explaining that many crypto assets and blockchain activities do not fall under federal securities laws. However, she said that does not mean every product built on blockchain technology is outside the agency's jurisdiction.

She also encouraged companies developing crypto vaults and onchain lending strategies to speak with SEC staff if they are unsure about how federal securities laws apply.

"We welcome inquiries from market participants involved in designing and operating vaults or facilitating onchain lending," she said. "You may not fall within our regulatory scope, but, if you do, we welcome the opportunity to talk with you about how to serve your customers in compliance with the federal securities laws."

Several crypto companies have moved into vault strategies in 2026. Bitwise announced plans in January to curate non-custodial vaults on Morpho, while Galaxy Digital launched an institutional vault business in July. BitGo also said in June that it planned to offer DeFi vault products to institutional clients.