Fluid and Kamino Flag Rehypothecation Risks in Jupiter Lend Vaults, Exposing Cross‑Vault SOL Loan Exposure
Fluid and Kamino have raised concerns about Jupiter Lend’s Vaults on Solana, warning that the vaults are not fully isolated and make use of rehypothecation to improve capital efficiency. Samyak Jain, Fluid co‑founder, acknowledged asset interconnections across vaults due to rehypothecation. Marius, co‑founder of Kamino, said the team paused a Jup Lend migration tool after user reports of confusion about design and risk, and disputed claims that vaults have no asset interconnections. They warned that a user supplying SOL and borrowing USDC could be exposed to recursive or nested borrowers such as JupSOL and INF, amplifying risk across vaults. The debate has sparked scrutiny within the Solana community over risk governance, disclosure practices and capital‑efficiency trade‑offs in on‑chain lending. Key topics: Jupiter Lend, rehypothecation, cross‑vault exposure, SOL/USDC positions, migration tool pause, community scrutiny.
Bearish
The disclosure that Jupiter Lend vaults use rehypothecation and are not fully isolated raises counterparty and liquidity‑cascade risks that can materially affect trader positions, especially for SOL suppliers borrowing USDC. Nested or recursive exposure increases contagion potential: if a rehypothecated asset loses value or a borrower defaults, losses can propagate across vaults, forcing deleveraging and rapid selling. Short‑term impact: elevated volatility for SOL and related tokens, possible USDC/borrow market dislocations, and increased withdrawals from Jupiter Lend as users reduce exposure. Market makers may widen spreads and lending rates could rise, pressuring leveraged positions. Long‑term impact: if disclosures and governance are not improved, trust in Solana lending primitives may erode, reducing TVL and capital inflows; projects may rework isolation and collateral mechanics, raising borrowing costs and lowering capital efficiency. Historical parallels: 2020–2021 DeFi incidents where rehypothecation or composability (e.g., recursive staking/borrowing) amplified losses — leading to sharp asset sell‑offs and liquidity crises — suggest similar dynamics could play out here. Overall this news increases downside risk for SOL and related lending markets until clarity, improved disclosures, or architectural changes reduce nested‑loan exposure.