Grayscale Sees On-Chain Vaults Challenging the $1.5T CLO Market
Grayscale Highlights On-Chain Vaults as Potential Challenger to $1.5T CLO Market – Regulatory Clarity Seen as Key Factor
Key Takeaways
- Grayscale’s Head of Research Zach Pandl says on-chain vaults could follow the mainstream adoption path of stablecoins, tokenized assets, and perpetual futures.
- The current on-chain vault market is valued at about $7.3 billion, with more than 3,000 managed vaults and 57 curators.
- Steakhouse, Sentora, and Gauntlet control over 70 percent of the existing vault market share.
- S&P Global cites real-world asset tokenization and regulatory clarity as key catalysts for further growth.
- The U.S. Securities and Exchange Commission stated in July that most vaults fall under federal securities law, subject to case-by-case review.
Grayscale Positions Vaults as the Next Phase of Crypto Adoption
On-chain lending and yield strategies, commonly referred to as vaults, are being presented by Grayscale as a potential next step in the broader evolution of crypto financial products. Zach Pandl, Head of Research at Grayscale, said vaults could follow a similar trajectory to stablecoins, tokenized assets, and perpetual futures. Each of those products began as niche experiments within crypto markets before gaining attention from traditional finance firms.
Vaults are structured as on-chain asset management systems. Instead of relying on traditional asset managers and custodians, they use smart contracts and independent curators such as Steakhouse or Gauntlet to manage pooled assets and deploy capital in pursuit of yield. This structure replaces conventional intermediaries with programmable mechanisms on blockchain networks.
According to Pandl, vaults represent a format that could extend beyond crypto-native use cases and integrate more closely with traditional credit markets. His comparison centers on collateralized loan obligations, or CLOs, a well-established segment of structured finance.
Comparison With the $1.5 Trillion CLO Market
CLOs track pools of individual corporate loans that are actively managed by asset managers. Investors in CLOs receive exposure to the interest generated by those underlying loans. The CLO segment is valued at approximately $1.5 trillion and is considered one of the most liquid areas within credit markets.
The resilience of CLOs during periods of financial stress is one reason they are widely used as a diversification tool. The article notes that Ethena selected CLOs as part of its strategy to diversify away from crypto market volatility, particularly during bear markets when yield generation in digital assets can become more challenging.
By comparing vaults to CLOs, Grayscale frames them as a blockchain-based alternative to traditional credit pooling structures. Instead of corporate loans assembled by asset managers, vaults aggregate on-chain strategies executed automatically through smart contracts. The suggestion is that vaults could compete with or complement parts of the existing structured credit ecosystem.
Current Market Structure: $7.3 Billion and Concentrated Control
Despite comparisons to a trillion-dollar market, the vault segment remains relatively small. The total market size is about $7.3 billion. Within that market, three curators dominate. Steakhouse, Sentora, and Gauntlet together control more than 70 percent of total market share.
In total, there are 57 curators and more than 3,000 managed vaults seeking to generate yield for investors. This indicates a fragmented operational landscape beyond the top three players, but with significant concentration in terms of assets under management.
For users evaluating crypto platforms, this concentration highlights that a limited number of curators currently shape most vault activity. Governance models, strategy design, and smart contract structures may therefore vary depending on the curator behind a given vault.
S&P Global Sees Real-World Asset Tokenization as Growth Driver
S&P Global recently expressed a similar view to Grayscale regarding the long-term potential of vaults. According to S&P Global, applications tied to real-world assets are expected to expand and may ultimately become the dominant use case for vault structures.
Real-world asset tokenization refers to the representation of traditional financial instruments or assets on blockchain networks. Within the context of vaults, this could involve structuring tokenized exposure to off-chain credit or income streams inside programmable, on-chain frameworks.
However, S&P Global also identified regulation as a key barrier to institutional adoption. One central issue is whether vault tokens are subject to U.S. federal securities laws. Uncertainty around classification has led many institutional investors to avoid direct investment in vault tokens, as they cannot clearly determine which regulatory framework applies.
SEC Clarifies That Most Vaults Fall Under Securities Law
In July, the U.S. Securities and Exchange Commission provided additional guidance on vaults. The agency stated that most vaults will fall under federal securities law. At the same time, it emphasized that this is not a blanket determination.
Instead, the SEC indicated that assessments will be conducted on a case-by-case basis, depending on the specific design and characteristics of each vault. This approach leaves room for variation based on structure, governance, and economic rights embedded in the token or contract.
For market participants, this clarification introduces a more defined regulatory framework, while still requiring individual analysis for compliance. For institutional investors that have remained cautious due to legal ambiguity, the SEC’s position may provide a clearer basis for evaluation, although not uniform treatment across all vault products.
Implications for Crypto Market Infrastructure
The discussion around vaults reflects a broader trend within digital asset markets: the attempt to replicate or reconfigure traditional financial instruments through blockchain-based systems. Stablecoins, tokenized assets, and perpetual futures have already moved from experimental stages into wider usage, including interest from traditional finance firms.
Vaults represent another step in that direction. Their current scale remains modest relative to established credit markets, but their structural similarity to CLOs positions them within a familiar framework for investors accustomed to structured products.
At the same time, regulatory classification and institutional participation remain decisive factors. With over 3,000 vaults and dozens of curators already active, the segment is operationally developed but still navigating legal definitions.
Our Assessment
Grayscale and S&P Global both identify on-chain vaults as a potential growth segment within crypto markets, particularly in connection with real-world asset tokenization. The current market stands at about $7.3 billion, compared with the $1.5 trillion CLO market used as a reference point. Regulatory clarity, including the SEC’s statement that most vaults fall under federal securities law subject to case-by-case review, remains a central factor shaping institutional participation and broader adoption.
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