Grayscale Research sees potential for onchain vaults to rival traditional finance’s trillion-dollar credit market

Grayscale Research published a report on July 29 arguing that onchain vaults, a relatively quiet corner of DeFi, could eventually compete with one of traditional finance’s most important capital allocation machines: the collateralized loan obligation market.

The pitch is straightforward. Onchain vaults pool investor capital into professionally managed portfolios chasing yield, much like CLOs bundle loans and slice them into tranches for institutional buyers. The difference is that vaults do it on blockchains like Ethereum, Base, and Solana, with full transparency baked into the architecture.

A $7 billion market staring at a $1.5 trillion opportunity

Approximately $7 billion sits across more than 3,000 vaults, managed by just 57 curators. That sounds respectable until you compare it to the traditional CLO market, which totals roughly $1.5 trillion across the US and EU combined, run by more than 250 firms.

The report, authored by Grayscale’s Zach Pandl, makes the case that blockchain infrastructure offers structural advantages that could narrow this divide over time. Transparency is the obvious one. Every position, every rebalance, every yield source in an onchain vault is visible on the blockchain in real time. Liquidity is the other selling point. Blockchain-based settlement can theoretically compress the time and cost of entering and exiting positions.

Stablecoins dominate the vault landscape

One of the more revealing data points from the Grayscale report: 79% of onchain vaults focus on stablecoins. Vault depositors, at least for now, aren’t looking for leveraged bets on volatile crypto assets. They want yield on dollar-denominated holdings.

The 57 curators managing these vaults function similarly to CLO managers in traditional finance. They make active decisions about capital allocation, choosing which protocols to deploy into, how much risk to take, and when to rotate strategies. Their track records and current positions are publicly verifiable, which creates a natural accountability mechanism.

Regulation remains the wildcard

The Grayscale report acknowledges that uncertain US securities regulations pose real challenges for onchain vaults, particularly around the role of active curators. The core question is whether a vault managed by a professional curator constitutes an investment contract under existing securities law, which would require compliance with registration requirements, accredited investor restrictions, and disclosure obligations.