U.S. Securities and Exchange Commission Commissioner Hester Peirce said crypto activity is not automatically outside the scope of federal securities law simply because it takes place on-chain. In a statement released on July 22, Peirce said many crypto assets and related activities may sit outside securities rules, but that does not exempt every structure used in the sector. If an activity would otherwise fall under securities law, moving it onto blockchain rails usually does not change its legal character. Peirce focused on crypto asset vaults that use smart contracts to allocate user funds into yield strategies such as staking and lending. She said securities law questions may arise when an operator selects those strategies, reallocates assets, or appoints decision-makers. Some vaults, she added, could be treated as common enterprises in which profits depend on the efforts of managers, or could trigger rules tied to investment companies, unit investment trusts, or investment advisers. She also said on-chain lending strategies may raise similar issues. Managers that set interest rates, collateral assets, loan-to-value ratios, and liquidation thresholds should assess whether their activities are regulated. In some cases, on-chain loans may also be treated as notes with security-like features depending on transaction purpose and distribution arrangements.
According to BlockBeats, U.S. Securities and Exchange Commission Commissioner Hester Peirce said on July 22 that many crypto assets and related activities may fall outside U.S. federal securities laws, but that does not mean every crypto activity is excluded from securities regulation. If an activity is already within the scope of securities law, moving it on-chain usually does not change its legal character.
Vault structures may trigger multiple regulatory frameworks
Peirce said crypto asset vaults typically use smart contracts to allocate user assets into yield strategies such as staking and lending. When a vault operator chooses the yield activity, reallocates assets, or designates decision-makers, that conduct may implicate securities law.
She said some vaults could be viewed as common enterprises in which profits depend on managerial efforts. Others may fall within regulatory frameworks tied to investment companies, unit investment trusts, and investment advisers.
On-chain lending strategies also face securities law questions
Peirce said on-chain lending strategies may also touch federal securities law. Managers that set interest rates, supported collateral assets, loan-to-value ratios, and liquidation thresholds should evaluate whether their activities are regulated.
She added that some on-chain loans may also be treated as notes with securities characteristics based on specific factors such as transaction motive and distribution arrangements.
Peirce invites engagement with the SEC
Peirce said the SEC welcomes discussions with crypto vault and on-chain lending project teams. If current rules are hindering innovation, market participants can also propose changes aimed at balancing investor protection, market order, and capital formation.
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