Crypto vault deposits have climbed above $10 billion, up from roughly $4 billion at the start of 2025, according to a report published Monday by the Financial Times. The growth reflects rising demand among investors for income generated from stablecoins and other digital assets, and it arrives as regulators in the United States and Europe consider how existing financial rules should apply to the fast-expanding sector.

Fintech firms, crypto treasury companies, and hedge funds account for much of the activity. Unlike traditional bank accounts, these services pool customer tokens and lend them out through blockchain-based programs. Withdrawal terms vary considerably from one product to another.

Institutional Demand Reshapes Crypto Lending

Each crypto vault relies on a curator to select loan markets, set risk limits, and charge fees. At today's scale, those curator decisions steer a pool of depositor capital more than twice the size it was at the start of the year. Interest in institutional crypto lending has also spread to XRP-based services, where new lending tools remain under development.

Vaults typically advertise annual returns of 3% to 10%, while some higher-risk strategies quote figures of 20% or more. The rates move with borrower demand, collateral conditions, and the amount of risk taken, and none of the advertised yields represents a guaranteed payment. Fees vary widely across products.

Collateral Quality Leaves Deposits Exposed

Borrowers may pledge thinly traded tokens, crypto-backed stablecoins, or digital claims on private loans. If those assets lose value, a vault can struggle to recover the money borrowers owe, and some collateral becomes harder to sell during market downturns. Depositors ultimately bear the risk of borrower defaults and collateral losses, which makes a curator's collateral standards and liquidation design as material to outcomes as the advertised yield itself.

Automated sales can magnify losses when markets decline. Recent crypto liquidations have shown how quickly forced selling can spread during volatile trading. A flawed price feed, a software bug, or an attack can also drain funds.

Two Prime Rolls Out Bitcoin Lending Vault

Two Prime introduced a wrapped bitcoin vault on Pareto in September. The product targets annual returns of 1.5% to 2% by lending deposited tokens to approved institutional borrowers. Investors must deposit at least five WBTC.

Two Prime says it placed about $12 million of its own money in a first-loss reserve, capital that absorbs initial borrower losses before depositors are affected. The firm cautions that the protection has limits and does not guarantee repayment. Withdrawals place only at scheduled monthly cycle boundaries, a structure that trades immediate access to funds for the added loss cushion.

US and European Regulators Review the Rules

The rapid growth has drawn scrutiny from policymakers on both sides of the Atlantic. The US Securities and Exchange Commission has questioned when vault arrangements fall under securities rules. In Europe, officials are examining oversight for businesses that give customers access to decentralized lending. Europe also plans direct oversight of USDC under separate stablecoin rules starting in November.

Smart contracts alone do not remove lending risk. Curators still decide where to place deposits, and borrowers must repay their loans. Regulators have yet to establish a uniform approach to the different crypto vault structures, and until they do, operators and depositors face rules that vary by jurisdiction rather than a single standard.

The report was first published by CoinCentral.