SEC Commissioner Hester Peirce published a statement on July 22 warning crypto vault and onchain lending operators that moving money onto a blockchain does not automatically exempt them from securities law. Peirce stated that some companies have been stretching legal interpretations to argue their crypto products fall outside SEC oversight. The statement addresses the fast-growing crypto vault and onchain lending industry, where investors deposit assets into blockchain-based systems to earn returns through strategies like staking or lending.
What Vaults and Lending Strategies Actually Are
A crypto vault is a tool that lets people holding crypto earn a return on it, using smart contracts, which are self-executing pieces of code on a blockchain, to automatically put those assets to work in strategies like staking or lending. Some vaults run entirely on autopilot through code alone, while others involve real people making active decisions about where the money goes.
Crypto lending strategies work similarly. Users deposit their assets into an onchain system, which then lends those assets out to borrowers in exchange for a fee.
Why This Could Trigger Securities Rules
Peirce explained that a vault could count as a security if it functions like what regulators call a common enterprise, where investors are putting in money expecting profits generated by someone else's active management. Depending on how it's structured, a vault might resemble an investment company, and an onchain loan could legally resemble a type of security called a note.
The people actually running these products, deciding interest rates, choosing which assets to support, or setting rules for when a loan gets liquidated, are the ones Peirce says should be asking whether their setup falls under SEC rules.
SEC Offers Compliance Pathway
Peirce encouraged companies building vaults or lending products to reach out to the SEC directly to find a compliant way forward. She added that the agency is open to updating its own rules if they're unnecessarily blocking innovation.
FAQ
What did SEC Commissioner Hester Peirce say on July 22?
SEC Commissioner Hester Peirce published a statement on July 22 warning that moving money onto a blockchain does not automatically put crypto vaults and onchain lending outside the reach of securities law.
Why could crypto vaults trigger securities rules?
Peirce explained that a vault could count as a security if it functions like a common enterprise, where investors put in money expecting profits generated by someone else's active management. Depending on structure, a vault might resemble an investment company, and an onchain loan could legally resemble a security called a note.
How can crypto vault operators comply with SEC rules?
Peirce encouraged companies building vaults or lending products to reach out to the SEC directly to find a compliant way forward. She stated the agency is open to updating its own rules if they're unnecessarily blocking innovation.
