The US Securities and Exchange Commission (SEC) has indicated that one of the fast-growing sectors of the decentralized finance industry could face increased scrutiny from regulators.
Commissioner Hester Peirce said in a statement Wednesday that crypto vaults and onchain lending strategies could fall under federal securities laws depending on how they are structured and managed.
While many crypto activities fall outside the SEC’s jurisdiction, she cautioned that moving them onto blockchain rails does not automatically change their legal status.
“Tokenized securities are still securities,” Peirce said, echoing her previous comments. “That principle applies to safes.”
“If you do headstands, backflips and other calisthenics to read the law so that it does not apply to crypto assets and activities that fall well within the scope of the federal securities laws, you will be in for a painful fall,” she added.
Her comments rippled through the crypto market. $MORPHO$1.9738one of the largest providers of vault infrastructure, fell around 5% after the statement, underperforming the broader crypto market.
Vaults have become one of DeFi’s fastest-growing products by allowing users to deposit crypto into smart contracts that automatically allocate capital to the credit markets and other return-generating strategies. Users receive returns while the rules of the vault, or in some cases professional managers known as vault curators, determine where funds are deployed.