Grayscale Research sees a future where onchain vaults compete directly with the trillion-dollar traditional credit market. The firm's analysts argue that these blockchain-based lending pools could open up credit to a much wider range of participants while making the whole system more transparent and liquid. But they also warn that none of that will happen without clear regulatory rules.
What onchain vaults could bring
Onchain vaults are essentially smart-contract-driven lending platforms. They let users deposit assets and earn yield, or borrow against collateral without going through a bank. Grayscale's research suggests that if these vaults scale up, they could pull in capital that's currently locked out of credit markets — from retail investors to smaller institutions. That would mean more competition and, potentially, better rates for borrowers.
The report points to the existing decentralized finance (DeFi) lending protocols as early proof of concept. But those are still a fraction of the size of the global credit market, which runs into the trillions. Grayscale thinks onchain vaults could eventually match that scale, provided the infrastructure matures and adoption spreads.
Democratizing access to credit
One of the biggest promises is broader access. Right now, credit markets are dominated by large banks and institutional players. Smaller businesses and individuals often struggle to get loans or face high rates. Onchain vaults could change that by letting anyone with a digital wallet participate — either as a lender or a borrower. The system would rely on code, not credit scores, to assess risk.
That could be a major shift for underbanked populations, though the report doesn't use that phrase. Instead, it focuses on the mechanics: collateralization ratios, liquidation protocols, and how smart contracts enforce terms automatically. The result, Grayscale says, is a market that's more inclusive by design.
Transparency and liquidity gains
Traditional credit markets are opaque. Loan terms, default rates, and collateral values are often hidden inside bank balance sheets. Onchain vaults, by contrast, put everything on a public ledger. Anyone can see what's being lent, at what rates, and how much is at risk. That transparency could reduce information asymmetries and make pricing more efficient.
Liquidity is another area where onchain vaults might outperform. Because assets are tokenized and can be traded 24/7, lenders can pull their money out faster than in traditional markets. That flexibility could attract more capital, creating a virtuous cycle of deeper liquidity and lower costs.
Regulatory clarity as the missing piece
None of this potential matters without a clear legal framework. Grayscale's research stresses that regulators need to define how onchain vaults fit into existing securities and banking laws. Questions around custody, consumer protection, and systemic risk remain unresolved. Until those are answered, institutional money will likely stay on the sidelines.
The report doesn't predict when that clarity will come. But it notes that jurisdictions moving first — like the European Union with its MiCA framework — could become hubs for onchain credit. The U.S., meanwhile, is still debating how to classify digital assets, leaving the industry in limbo.
For now, Grayscale's analysts are watching for regulatory signals. The next big step, they say, will be a clear set of rules that lets onchain vaults operate alongside traditional finance — not just as an experiment, but as a real alternative.
