SEC Commissioner Releases Statement on Applicability of Securities Laws to Crypto Vaults and Lending Strategies

SEC Commissioner Hester Peirce has released a statement on the applicability of the federal securities laws to crypto vaults and lending strategies. As a point of departure, Ms. Peirce reminds readers that, although the SEC has found certain crypto assets and activities to be outside the scope of these laws in recent times, this sometimes may not be the case. On this note, she cites the principle that “[m]oving activities that fall within the scope of the federal securities laws onchain, as a general matter, does not take those activities outside the scope of the laws the Commission administers.”

Shifting the discussion to crypto vaults specifically, Ms. Peirce suggests that part of the problem in determining whether they are subject to the federal securities laws is that, like many other new crypto-related technologies, there is no single, generally accepted definition of the term. Crypto vaults range from “programmatic allocations determined solely by immutable smart contracts, to allocations at the sole discretion of another person or group of persons,” and the “features and strategies” associated with these vaults are constantly evolving. She points out that such frequent evolution is likewise true of crypto lending strategies, which can be defined as strategies that “allow participants to deposit their assets into onchain systems that lend them for a fee to borrowers who can put those assets to use.”

Though she gives a number of examples of situations in which crypto vaults and lending strategies might “implicate the federal securities laws,” Ms. Peirce ultimately stresses that the determination of whether these laws apply is a matter of the individual registrant’s facts and circumstances. She thus concludes by encouraging those involved with crypto vaults and onchain lending to work with the SEC to ensure compliance.