Risk-curator boom in 2025 now blamed for recent DeFi lending vault troubles

Risk curators shifted the balance of DeFi in 2025. The new players came to attention after several lending vaults faced low liquidity and some caused deep losses for lenders. 

Risk curators faced one of their big tests, after a series of DeFi vaults caused losses, or kept user funds stuck with no liquidity. In the past few days, vaults that accepted risky stablecoins as collateral in exchange for less risky USDT, USDC, or USD1, caused a series of bad credits. 

In DeFi lending, vaults are usually chosen by users. However, the presence of risk curators meant some DeFi funds from low-risk vaults were moved to other lending protocols. Crypto market participants have warned about curators previously, as some of their vaults showed signs of distress months ago, with high yields and low liquidity. 

Risk curators were first introduced by Morpho Protocol, allowing a new type of player. The protocol allowed curators to build vaults, which were not like the fixed lending pools of Aave. The vaults had their own rules on allocating liquidity and setting up interest rates. The problem was that some of the vaults set up risky collaterals, which ended up destroying some of the pools. 

Gauntlet paused withdrawals on Compound

Gauntlet, one of the most active risk curators in November, paused withdrawals on one of its Compound vaults. The losses will be absorbed by vault participants and the holders of the de-pegged stablecoin used as a collateral. 

Aave’s founder Stani Kulechov marked the event as one of the recent crashes in DeFi lending.

As Cryptopolitan reported earlier, the vault’s locking was caused by the crash in the deUSD stablecoin by Elixir protocol. Elixir crashed as a sign of contagion, due to exposure to Stream Finance. 

Just before suspending one of its vaults, Gauntlet claimed all its lending selections were safe, with no risk exposure. Compound, however, was willing to accept some of the riskier stablecoins, thus allowing risk curators to build the currently locked vaults. 

Silo Labs, MEV Capital, and other curators have now isolated their problem vaults, and are considering recourse for the lenders. However, the vaults no longer accept deposits and have been isolated. In theory, liquidity could return if the depositors repaid their loans, but they would receive a depreciated collateral. 

As a whole, risk curator protocols carry $7.5B in total value locked, around 10% of the deposits held in lending protocols. The main danger of contagion may spread from vaults that use risky assets, especially de-pegging stablecoins. In the past three days, the value locked in curated vaults crashed from a peak of $10B, signaling a rush to withdrawals where possible. 

Several stablecoins traded below peg, most notably USDX, as well as deUSD. XSGD also traded at $0.76. The biggest risk comes from stablecoins not backed by any assets, but deriving their value from algorithmic activity. 

Multiple Morpho vaults have high utilization

The ability to borrow more reliable stablecoins against riskier ones meant a rush to take out loans, with no fear of liquidation. Currently, borrowers are liquid, while lenders see themselves locked out of the vaults, with no way of recouping their deposits. 

On Morpho, the riskiest vaults were closed for deposits. However, dozens of other vaults had 100% utilization, meaning withdrawals were impossible.

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