Crypto Council launches Vault Coalition to clarify DeFi regulatory status
In brief
- Vault Coalition launched June 5 by Crypto Council for Innovation with Galaxy, Morpho, a16z crypto, Avalanche Policy Coalition, BitGo, and Sharplink
- Vault token legal status, operator custody, and investment company classification remain unresolved under US law
- Coalition will commission legal analysis, develop policy principles, and directly engage regulators
- Institutional capital allocators blocked from deploying meaningful funds into vaults without legal clarity
The core problem
A vault operates as a pooled investment vehicle on smart contracts where users deposit digital assets to generate yield and receive transferable tokens representing their proportional share. Yet the legal status of these receipt tokens, vault operator custody responsibilities, and whether yield-generating smart contracts constitute investment companies remain unclear under US law.
This ambiguity creates a real barrier to institutional adoption. Capital allocators at banks, asset managers, and family offices face a fundamental problem: they can't deploy meaningful capital into vault structures where legal classification remains unresolved. Without clarity, billions in potential institutional capital sits on the sidelines.
The coalition's three-part strategy
The Vault Coalition plans to commission outside legal counsel to conduct comprehensive legal analysis of vault structures and how existing securities laws, custody rules, and investment company regulations apply to them. This work will map the regulatory landscape and identify specific pressure points.
Second, the group intends to develop what it calls "market-informed policy principles." The goal is to create consensus-driven frameworks reflecting how vaults function in practice, not how regulators might imagine them.
Third, the coalition will pursue direct engagement with US regulators. Rather than waiting for a notice of proposed rulemaking or enforcement action, the group aims to shape the regulatory conversation proactively. This approach could prevent costly misclassifications later.
Why institutional players are involved
Galaxy operates one of the largest institutional trading desks in crypto. BitGo is a regulated custodian. a16z crypto manages billions in venture capital. Their participation signals that institutional infrastructure providers see vault clarity as essential to the next phase of DeFi growth.
The risk is real. Regulators could classify vault tokens as securities, which would impose registration requirements, restrict participation, and potentially make many existing vault structures non-compliant. A proactive coalition effort may be the only way to avoid that outcome before enforcement action forces the issue.
