SEC Commissioner Peirce issued a statement: crypto treasuries and on-chain lending strategies may be subject to federal securities laws

Deepwave TechFlow message: On July 22, according to the SEC website, Commissioner Hester M. Peirce issued a statement on July 22 to flag issues at the intersection of crypto vaults (Vaults) and on-chain lending strategies with federal securities laws.

Peirce noted that moving activities on-chain does not automatically remove them from the scope of securities law regulation. Crypto vaults allocate users’ assets into yield-generating activities such as staking and lending through smart contracts; if their operators are involved in actions such as selecting yield strategies or reallocating assets, they may trigger compliance obligations under securities laws. Some vault structures may be deemed to be joint ventures, or may fall within the scope of regulation of investment companies. For on-chain lending strategies as well, management actions such as setting interest rates, determining asset eligibility, and establishing liquidation thresholds may also involve securities laws, and the related loans may, under certain conditions, be considered securities-like instruments.

Peirce said the SEC welcomes market participants in the vaults and on-chain lending space to proactively communicate, seek input from all parties, and explore whether rule revisions are needed to protect investors while leaving room for innovation.