The Crypto Innovation Council (CCI), along with members such as Bitwise, Galaxy Digital, and Morpho, submitted a 238-page report to the U.S. Securities and Exchange Commission (SEC), recommending differentiated regulation of on-chain vaults based on the degree of control operators have over user assets and investment decisions. Vaults that automatically execute lending strategies according to fixed rules should be subject to different standards than products that allow operators to independently select loans, adjust terms, and reallocate funds; the greater the control, the more it should be subject to securities regulation. For vaults that may be classified as investment companies, the CCI recommends that the SEC follow the ETF approach, first approving exemptions on a case-by-case basis, and then developing uniform rules based on industry conditions.
