The U.S. Securities and Exchange Commission (SEC) has indicated that certain aspects of decentralized finance (DeFi), particularly crypto vaults and onchain lending, could come under increased regulatory oversight.
In a statement released on Wednesday, Commissioner Hester Peirce remarked that the structure and management of these financial products could align them with federal securities laws.
Despite many crypto activities existing outside the SEC's regulatory domain, Peirce warned that simply utilizing blockchain technology does not exempt these products from legal classification. “Tokenized securities are still securities,” she stated, reinforcing her previous comments. “That principle holds for vaults.”
She cautioned those attempting to manipulate legal interpretations to evade regulatory scrutiny, saying, “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.”
Following her remarks, the price of MORPHO, a leading provider of vault infrastructure, declined by approximately 5%, underperforming against the overall crypto market.
MORPHO price today (CoinDesk)DeFi vaults are rapidly gaining traction, with over $8 billion in assets as users deposit cryptocurrency into smart contracts that automatically allocate funds across various lending markets and yield-generating strategies. These vaults, which can be managed by professional curators or operate through automated rules, enable users to earn returns based on the investments made.
Major exchanges and brokerages, including Coinbase and Robinhood, have begun offering these vaults to provide yields on users' stablecoin holdings. As reported by Vaults.fyi, there are currently 788 curated vaults holding $8.6 billion in assets, reaching 1.4 million users as of July.
Peirce pointed out that the design of vaults can vary significantly, from fully automated smart contracts to products where managers or curators actively choose investment strategies and manage asset allocations. Such activities could potentially categorize them as investment companies or advisers under existing securities regulations.
She also extended her caution to onchain lending strategies, suggesting that decisions regarding interest rates, collateral requirements, and the types of assets supported could also trigger securities law considerations depending on specific circumstances.
Peirce encouraged developers to proactively engage with the SEC rather than assuming that blockchain technology places them outside the agency's jurisdiction. “These new approaches to the deployment of assets hold great promise,” she stated. “The promise will only be realized, however, if we grapple now with the intersection between these asset deployment tools and the federal securities laws.”
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Crypto Flows, Share and the Selective Rotation
Crypto Flows, Share and the Selective Rotation
Markets repositioned since June, but Binance held share (~55% user funds, ~24% spot) and drew net inflows in early July while the tracked market saw outflows.
By CoinDesk Research1 hour agoMarkets repositioned since June, but Binance held share (~55% user funds, ~24% spot) and drew net inflows in early July while the tracked market saw outflows.
Why it matters:
Markets repositioned since June, but Binance held share (~55% user funds, ~24% spot) and drew net inflows in early July while the tracked market saw outflows.
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