Commissioner Peirce Delivers Remarks on Crypto Updates

On July 22, Securities and Exchange Commission (SEC) Commissioner Hester Peirce delivered remarks on crypto vaults and lending strategies. In her remarks, Commissioner Peirce noted that while cryptocurrencies are not securities, that does not mean “that the securities laws do not apply to any crypto assets or activities.” She noted that this principle holds for vaults, which allow holders of crypto assets to generate a yield on those assets by using smart contracts to allocate user assets to various yield-generating activities, including staking and lending. Commissioner Peirce noted that industry participants involved in facilitating these types of activities may want to consider whether their activities fall under the umbrella of the securities laws. In addition, crypto lending strategies have also blossomed by allowing folks who hold these assets to deposit them into onchain systems that enable individuals and entities to borrow them for a fee.

The Commissioner noted that these types of activities could be viewed as an investment company because “they allocate assets to investments in securities,” or a unit investment trust because “they hold a fixed portfolio of assets with little or no active management.” These activities may also implicate the Advisers Act as well. Commissioner Peirce notes “Whether a particular vault or lending strategy’s structure and activities are within the scope of the federal securities laws will come down to the specific facts and circumstances.” She encourages market participants to work with the SEC as these innovations may require a review of the current regulatory framework.

Click here to read Commissioner Peirce’s statement.