The DeFi industry is divided over whether crypto vaults should be subject to SEC regulation, with Aave and others opposing the use of the degree of human intervention as the determining criterion

Odaily reports: The Crypto Council for Innovation (CCI) previously submitted a 238-page report together with Bitwise, Galaxy Digital, and Morpho to the U.S. Securities and Exchange Commission (SEC), proposing a framework for determining whether crypto vaults should be recognized as securities. In response, Aave Labs, Veda Tech Labs, and Kamino Foundation submitted another legal analysis opposing the use of human management and decision-making authority as the primary basis for determining whether DeFi protocols are subject to securities law regulation.

CCI argues that the degree of control and discretion that human managers exercise over vault investment strategies is an important factor in determining whether a vault constitutes a security; Aave and the other two parties, however, argue that even if a vault is actively managed by humans, as long as users retain rights to their assets and there is no legally recognized joint investment enterprise or issuing entity, securities regulation should not automatically apply. Both sides agree that providing paid investment advice involving securities may still be subject to regulation under the Investment Advisers Act. This divergence highlights the challenges the SEC faces in defining the boundary between decentralized finance software and regulated investment products. (Cryptoinamerica)