BTC
ETH
SOL
XRP
BNB
TON
DOT
LTC
POL
HBAR
NEAR
ARB
UNIZigfinance and Echo Base executives warn of systemic risk as DeFi lending vaults pass $10bn
Deposits in DeFi crypto lending vaults have risen from about $4bn in early 2025 to more than $10bn, and industry figures say risk controls and capital buffers have not kept pace.
Why it matters: Institutional money is flowing into DeFi lending vaults at scale, and the experts quoted say shared collateral and thin liquidity could turn one failure into wider contagion.
Key points
- DeFi lending vault deposits grew from roughly $4bn in early 2025 to over $10bn, according to a Financial Times report.
- Zigfinance's Abdul Rafay Gadit cites collateral reuse and liquidity mismatch as the main vulnerabilities.
- Echo Base's August Widmer calls for Basel III-style capital buffers, pointing to the early 2026 Kelp DAO exploit.
Deposits in DeFi crypto lending vaults have passed $10bn, up from about $4bn at the start of 2025, Bitcoin.com News reports, citing a Financial Times report. Investors are moving stablecoins and other tokens into the vaults in search of higher yields rather than leaving the capital idle. The report describes the growth as a regulatory blind spot, warning that depositors chasing double-digit returns often do not understand the systemic, smart-contract and illiquidity risks involved.
Abdul Rafay Gadit, co-founder and chief commercial officer at Zigfinance, told Bitcoin.com News that risk-management frameworks are being adopted unevenly. He said growth is outpacing safeguards in parts of the market, particularly around underwriting and liquidity, and that fee structures reward asset growth without holding anyone accountable for losses.
Collateral and liquidity risks
Gadit named collateral reuse as the main vulnerability: a vault share can be borrowed against elsewhere, layering leverage on the same assets, so a collapse in value or liquidity can spread liquidations across connected markets. Liquidity mismatch is a second threat, he said, because vaults offering fast withdrawals against private or locked loans can run short of liquid reserves in an exit wave.
August Widmer, a partner in investments at Echo Base, said most crypto firms face no mandatory capital buffers, unlike banks under Basel III. He pointed to the early 2026 Kelp DAO exploit as an example of how a failure at one protocol can spread. Experts also called for proof of exposure, conservative haircuts and limits on related-party collateral.
Live updates on NewsFeeds:AltcoinsStablecoinsDesk editor: Keshav Aggarwal (accountable for this page; this summary was not edited by hand)
How this was produced: an AI model wrote this summary of Bitcoin.com News’s report, which we credit and link above. Read our Editorial and AI policy. Spotted a mistake? See Corrections.
Not investment advice. Read the risk disclaimer.