The US Securities and Exchange Commission (SEC) has signaled that one of the fast-growing sectors of decentralized finance could face increased regulatory scrutiny.
In a statement on Wednesday, Commissioner Hester Peirce said cryptocurrency vaults and on-chain lending strategies may be subject to federal securities laws depending on how they are structured and managed.
While many crypto activities fall outside the SEC’s jurisdiction, he cautioned that moving them onto the blockchain rails does not automatically change their legal status.
“Tokenized securities are still securities,” Peirce said, echoing his previous comments. “That principle applies to vaults.”
“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 within the scope of the federal securities laws, you will have a painful fall,” he added.
His comments reverberated throughout the cryptocurrency market. one of the largest vault infrastructure providers, fell approximately 5% following the statement, underperforming the broader crypto market.
Vaults have become one of DeFi’s fastest-growing products by allowing users to deposit cryptocurrency into smart contracts that automatically allocate capital between lending markets and other yield-generating strategies. Users receive profits while the vault’s rules, or in some cases, professional administrators known as vault curators, determine where the funds are used.
