Funds held in crypto vaults have topped $10 billion, up from about $4 billion at the start of 2025, as investors seek higher yields on stablecoins, the Financial Times reported, citing analytics group Blockworks. In July and September, respectively, the U.S. Securities and Exchange Commission and the European Securities and Markets Authority outlined ways that vaults or intermediaries providing access to them could come under regulatory oversight amid risks linked to decentralized-finance lending.

Crypto vaults allow digital-asset holders to allocate tokens under a selected strategy and earn yield, including by lending assets to traders, according to the report.

How crypto vaults work

Vaults use smart contracts to manage assets without traditional intermediaries. Each vault also has a curator, comparable to a fund manager, who selects the strategy, sets risk parameters and charges a fee.

Typical strategies involve lending or staking tokens and offer yields of around 3% to 10%, while riskier options may offer more than 20%, the report said.

Adrian Kachinero Vasiljevic, co-founder of Steakhouse Financial, said the main depositors include fintech companies with large stablecoin reserves, digital-asset managers and hedge funds. The Financial Times identified Steakhouse Financial as the largest vault curator.

Although vaults give investors greater control over collateral, they can automatically liquidate positions if problems arise, potentially amplifying a market sell-off.

“In a stress scenario, things can change very quickly,” said Andrew O’Neill, head of digital asset analytics at S&P Global Ratings. He said problems in DeFi spread much faster than in traditional financial markets.

Leopold Wenger, head of digital assets research at Kaiko, also described the segment as risky. He said investors often focus on interest rates without understanding liquidity metrics and other risk parameters, even though vault operating terms are set out in open smart contracts.

SEC and ESMA examine oversight

In July, the SEC said it was examining the conditions under which crypto vaults could fall within securities laws.

SEC Commissioner Hester Peirce said vaults that hold securities or allocate assets for investment in securities could meet the definition of an investment company. Some may also operate similarly to unit investment trusts, she said.

In September, ESMA proposed regulating intermediaries that facilitate access to DeFi services. ESMA told the Financial Times that the proposals could extend to lending vaults when crypto-asset service providers provide access to them.

Jonathan Galea, a lawyer at Cahill Gordon & Reindel, said curators that continuously adjust strategy parameters and oversee asset flows could be viewed as counterparts to traditional fund managers. Relevant regulatory requirements could then apply to them.

Wenger said a potential shift toward regulated activity was one of the biggest risks facing curators because a significant portion of the segment still operates without dedicated oversight.

Source: Incrypted