.png)
A niche area of the crypto investment space made quite a bit of noise in recent weeks, bringing renewed attention to DeFi vault providers, curators and the broader risks associated with yield-generating onchain financial products.
By way of a brief description, vaults earn yield on certain digital assets through automating the deployment of capital into onchain strategies. Using a vault smart contract, token depositors can allocate across various strategies including lending, liquidity provisioning and delta neutral approaches, whereby a vault automatically earns yield and reinvests its holdings based on a defined set of rules. In addition, vaults are structured to be highly liquid in that a depositor can redeem their vault token at any time.
Each vault has a curator that is responsible for allocating capital, managing strategy risk and, in newer versions, appointing an investment manager similar to a sub-advisor for an investment fund.
Recent Events Highlighting Vault Vulnerabilities
A recent incident involving one such vault highlighted how quickly operational and oversight expectations are evolving. A combination of complex strategy design, rapid growth and gaps in communication resulted in a temporary suspension of deposits and withdrawals. While the issue was isolated to a single vault, it prompted many vault participants to revisit where standards around transparency, monitoring and operational controls may benefit from additional clarity.
A concern that surfaced was whether the illiquidity of the affected vault would influence other parts of the ecosystem, particularly for users who had lent against vault tokens. Some feared this could trigger similar liquidity restrictions across other pools, similar in concept to multiple runs on banks. Fortunately, and due to how most vault infrastructure providers silo individual vaults, the situation remained contained.
As the popularity of vaults and similar yield-generating structures continues to grow, both within native crypto markets and among traditional financial institutions exploring tokenized products, the operational characteristics of these structures remain less examined than the strategies themselves. This presents an opportunity to apply established due diligence processes that can help reduce uncertainty and improve the overall functioning of the ecosystem.
This was reflected in the Crypto Insights Group November 2025 survey. Responses to a question regarding curator transparency showed a strong preference for more consistent insight into curator decision making, strategy parameters and risk controls.
.png){kind=spacer}
The Responsibility of Vault Participants
The question of who should be responsible for managing the operational risk of a vault is not a simple one. In practice, responsibility sits across every participant in the structure.
Vault infrastructure providers
Some providers have historically viewed their role as enabling open access to technology, where curators are responsible for managing risk. As the ecosystem matures, many are evaluating whether baseline information standards or lightweight onboarding checks could support clearer expectations for users, without altering the permissionless nature of their platforms.
Curators
Curators carry a central responsibility in managing a vault. As their role expands, especially when they engage third-party investment managers, expectations around operational controls, mandate oversight and communication naturally increase. The recent incident highlighted how valuable it can be for curators to document and demonstrate the processes they already follow when managing these structures.
Depositors
Historically, depositors have relied largely on onchain transparency or performance signals. As vaults scale and become more financially meaningful, many depositors and lenders are beginning to explore independent assessments of the vault infrastructure they use and the curators they rely on.
Considerations for Vault Standards
The suggested due diligence standards above represent what many in the industry are beginning to view as a reasonable minimum for vault participation. As more traditional managers and institutions explore these structures, expectations will likely rise in both scope and formality.
Many curators entering the market will already be investment managers subject to financial regulation. As such, they may naturally begin applying elements of their existing frameworks to the vaults they operate. Specifically, one can foresee greater application of AML and KYC requirements, demonstration of operational controls that are subject to independent testing, and the incorporation of sophisticated levels of portfolio risk management, as just a few examples.
These developments are not obstacles. Rather, they reflect a natural evolution toward greater clarity, structure and consistency as vaults seek to attract a broader audience and larger pools of capital. Participants throughout the ecosystem are beginning to consider how these practices can be integrated in a manner that supports both transparency and the inherent flexibility of onchain strategies.
Crypto Insights Group & Vaults
Crypto Insights Group has deep experience and data across digital asset strategies and operational practices. Our work with investment managers, allocators and infrastructure providers positions us to support a new regime of practical standards for vault participants. The goal is to reduce unnecessary risks, offer clearer transparency and assist the ecosystem in attracting new capital in a responsible way.
Ready to learn more about curators, vault infrastructure, and recent events?
