Key Points

• Cryptocurrency lending vault deposits have increased by approximately 150%, reaching $10 billion.
• The review by SEC and European regulatory authorities has drawn more attention to vault managers.
• S& P Global has launched a new on-chain lending risk assessment system.

As more and more investors use decentralized finance (DeFi) platforms to generate profits from stablecoins and other digital assets, the deposits in crypto lending vaults have exceeded $10 billion, a significant increase from around $4 billion at the beginning of 2025.

This growth of approximately 150% has drawn attention from the market to managers who control lending strategies. The U.S. Securities and Exchange Commission (SEC) and European regulatory authorities are studying how existing financial rules apply to these structures. The Financial Times reported on the latest developments on October 19th, noting that the annualized yields for different strategies range from 3% to over 20%.

Encrypted lending vault attracts $10 billion, with yields of up to 20%

Unlike traditional lending pools, many crypto vaults rely on professional managers known as “curator”. These operators select lending markets, set collateral requirements, adjust risk parameters, and allocate the deposited funds to different lending strategies.

Investors deposit assets such as USDC or USDT, and in return, they receive tokens that represent their equity in the vault. The returns typically come from interest paid by borrowers, although some strategies may also involve additional incentives or more complex exposures.

This expansion is particularly noteworthy as more and more established crypto companies are integrating decentralized lending infrastructure. For example, Coinbase has expanded its on-chain lending services through Morpho, and its newer fixed-rate loans have introduced different borrowing arrangements.

Institutional participation is also increasing. Flare previously integrated FXRP into a lending treasury operated by Morpho with a scale of $280 million, RLUSD, demonstrating how the collateral supported by XRP can be connected to the Ethereum-based credit market.

However, attractive returns do not necessarily mean low risk. Borrowers may provide collateral with higher volatility, and complex liquidation mechanisms may amplify losses during sudden market downturns.

SEC and European regulators examine the lending risks of DeFi

Regulatory attention is increasingly focusing on whether vault managers are performing functions similar to those of traditional investment managers.

SEC Commissioner Hester Peirce warned in a statement in July that certain crypto activities might fall under the scope of existing securities laws, regardless of the technology used. Her comments did not categorize all lending platforms as securities products, but emphasized the importance of assessing each type of structure individually.

European regulators have also pointed out the risks associated with collateral chains, liquidity, and chain-based clearing in decentralized lending. These concerns become even more significant when multiple protocols rely on the same assets or interrelated lending positions.

Past failure cases illustrate the potential consequences. The collapse of Elixir stablecoins exposed financial links between multiple DeFi platforms, while earlier market liquidations showed how rapidly falling crypto prices forced the closing of leveraged positions.

S& P Global Launches Treasury Risk Assessment

During the regulatory discussions, there has also been an important advancement in institutional-level encryption infrastructure.

On October 4th, S& P Global Ratings launched an evaluation framework specifically for digital asset lending vaults. Its methodology assesses from six aspects: portfolio credit quality, liquidity mismatch, manager risk, blockchain risk, protocol risk, as well as vault security and governance.

This move reflects an increasing demand from the market for standardized risk information, as DeFi is becoming more and more similar to traditional actively managed investment products. Institutional interest has expanded to various areas of the crypto lending market, including the broader Sky ecosystem.

Elara Voss

A journalist who covers the cryptocurrency market, blockchain innovation, and global digital asset regulation. She has a background in financial research and technology reporting, focusing on market fluctuations, emerging protocols, institutional adoption, and the ever-changing role of cryptocurrencies in the global economy.