SEC Commissioner Hester Peirce says onchain vaults may fall inside US securities law. Europe wrote that answer a year ago: curators making allocation calls over pooled deposits are asset managers, and MiCA already says so.
SEC Commissioner Hester Peirce said in a statement this week that onchain vaults and lending strategies may already fall within federal securities laws. Moving activity onchain, she wrote, does not take it outside those laws, and anyone doing "headstands, backflips, and other gymnastics to read the law so that it does not apply" to activities within its scope "will have a painful fall." The statement is not a rule, and Peirce spoke only for herself. It is the second time in three months that SEC leadership has publicly addressed vaults; Chair Paul Atkins raised the same question in May.
Peirce set out several ways US law could bite. A vault could be a common enterprise, a management investment company, a unit investment trust or a separately managed account. Its curators could be investment advisers. The tokens depositors receive could be securities. Each depends on facts and circumstances, she wrote. She invited firms in to talk.
That is the American version of a question Europe answered in 2024. Under the Markets in Crypto-Assets regulation, discretionary portfolio management of crypto assets is a regulated activity that requires authorisation from a national competent authority. The permission passports across the EU, capital minimums run from €50,000 to €150,000 depending on service, and since 30 December 2024 only authorised crypto-asset service providers can offer these services in the bloc. The transitional grandfathering for pre-MiCA firms ended at the start of July. The regime is live.
The Block's Funding newsletter this week put the same question to curators, protocols and industry groups, and found a European voice cutting through the crypto-native equivocation. "Since the beginning of the year we have been clear about vaults: this is asset management, it is a regulated activity, and you cannot get away from that," said James Harris, chief executive of Tesseract Group. Pooled structures at vault scale, Harris said, "very much look like collective investment schemes." Tesseract holds a MiCA portfolio-management authorisation. In April it launched what it calls dedicated client vaults: one client, one vault, one segregated mandate.
The pushback from vault infrastructure firms follows a familiar shape. Morpho's general counsel Christopher Robins told The Block that treating every vault as an unregistered fund "collapses several distinct functions into one." Gauntlet's chief business officer Nicholas Cannon said broad statements of that kind "can't be anything other than misinformed and broadly incorrect," placing Gauntlet's work "much closer to programmatic vault curation that is non-discretionary in nature." Andy Martinez of Crypto Insights Group put it more sharply, telling the newsletter that the argument "many vaults function as unregistered funds deserves to be taken seriously" and that "very few" curators of any size are registered advisers today.
The industry's most-cited defence is that vaults are non-custodial. Depositors can withdraw, allocations are enforced onchain by code, and curators never hold user assets in a legal sense. That is technically accurate and analytically insufficient. A curator that selects the markets, sets the risk limits and takes a fee for its judgment is exercising discretion over pooled deposits for a fee. Custody decides which regulator writes the rulebook, not whether the rulebook applies. A prime brokerage arrangement does not turn a hedge fund into a technology firm, and a smart contract wrapper does not either.
Non-discretion is the harder claim, and the numbers work against it. Data provider vaults.fyi tracks about $8.75 billion across 811 curated products, of which lending vaults account for $5.8 billion at an average return near 3.7 per cent and strategy vaults for $3 billion at 7.7 per cent. The premium sits with active management. The market is also concentrated: five curators hold 70 per cent of curated value, and the 25 largest stablecoin vaults on Morpho allocate half their combined capital to just three underlying markets. Those are asset-allocation decisions taken by identifiable firms. Calling them "programmatic" does not change who chose the parameters.
Europe is right to pull these firms inside a licence. MiCA's portfolio-management article is not about custody; it is about discretion over crypto assets held for someone else, which is what curators of any size are doing. A licence buys the depositor seven things that a smart contract alone cannot deliver: capital adequacy, governance requirements, conflict-of-interest disclosures, complaints handling, audit obligations, marketing rules and a supervisor with the power to strike the firm off. Retail users in curator-managed vaults today have none of them.
The Crypto Council for Innovation's Vault Coalition wants a technology-neutral framework that regulates activities rather than infrastructure. That principle is defensible, and it leads exactly to the conclusion the industry is trying to duck: the discretionary curator role, wherever it sits, is the activity a MiCA CASP licence already covers. Morpho, Gauntlet and their peers can apply, partner with an authorised entity that runs the discretion piece for them, or restructure their products so no discretionary judgment ever enters. Peirce's American statement invites firms in for a conversation. Europe has already had the conversation, written the rule and started the clock. Curators serving EU users who have not yet begun the CASP application should assume their national competent authority has already noticed.
Reporting in this piece is drawn from The Block's Funding newsletter dated 27 July, in which Yogita Khatri put these questions to Ryan Rodenbaugh of vaults.fyi, James Harris of Tesseract Group, Andy Martinez of Crypto Insights Group, Christopher Robins of Morpho, Nicholas Cannon of Gauntlet, Alison Mangiero of the Crypto Council for Innovation, Rob Hadick of Dragonfly, Richard Galvin of Digital Asset Capital Management, and Bitwise general counsel Johanna Collins-Wood.
