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The Crypto Council for Innovation (CCI) has urged US regulators to judge crypto vaults by how much control operators hold over deposited assets, in a framework backed by Bitwise, Galaxy Digital and Morpho. The proposal is an industry recommendation, not SEC rulemaking. It would determine which vaults fall under US securities law.
The central feature of the proposal is a framework designed to measure the degree of control exercised by people or organisations managing deposited assets.
The CCI believes this distinction is important because some blockchain-based financial products operate almost entirely through predetermined smart contract instructions, while others depend heavily on human decisions.
Under the proposed approach, regulators would examine four areas of operator authority: mandate, execution, governance and disposition.
These categories would help establish whether a platform manager can choose investment strategies, determine where capital is deployed, modify protocol rules or transfer deposited assets. The more discretion an operator retains, the greater the potential regulatory implications.
The framework also examines the level of control available to investors. It identifies six important conditions: comprehensibility, verifiability, observability, predictability, notice and actionability.
In practical terms, investors should be able to understand how a product works, verify its operations, monitor changes, anticipate possible outcomes and receive sufficient notice before important decisions take effect.
The CCI argues that these safeguards can help regulators distinguish genuinely automated financial infrastructure from investment arrangements that rely on the managerial expertise of identifiable individuals.
The involvement of Bitwise, Galaxy Digital and Morpho gives the proposal considerable industry relevance. Their representatives contributed to the CCI’s Vault Coalition, which worked alongside legal advisers from Chapman and Cutler LLP to develop the report.
Bitwise CEO Hunter Horsley expressed enthusiasm about the development, highlighting the potential influence of the technology on financial markets.
The participation of these organisations reflects growing interest in bringing blockchain-based financial infrastructure closer to conventional investment markets.
However, the proposed framework is not an official SEC regulation or an announcement that crypto vaults have received regulatory approval. It represents an industry-backed recommendation for how existing laws could be applied.
The CCI’s recommendations also build on concerns previously raised by US Securities and Exchange Commission Commissioner Hester Peirce.
In a July 22, 2026, statement titled Headstands and Summervaults, Peirce explained that moving financial activities onto blockchain networks does not automatically exempt them from existing securities regulations.
She specifically highlighted the differences between automated systems and arrangements where individuals or organisations exercise significant control over deposited assets.
Peirce also cautioned that regulatory classification would depend on the structure and activities of each individual product.
Platforms involved in selecting investment opportunities, reallocating funds, determining lending conditions or controlling withdrawals may need to assess whether their activities fall within existing securities requirements.
The SEC’s position is important because crypto businesses cannot necessarily avoid regulatory obligations simply by replacing traditional financial infrastructure with smart contracts.
The CCI’s proposal draws parallels with Section 10301 of the proposed CLARITY Act, which considers whether identifiable individuals or groups can control or materially change the operation of certain digital asset protocols.
It also recommends that the SEC consider granting exemptions under Section 6(c) of the Investment Company Act of 1940 to qualifying structures before developing broader regulatory standards.
The approach resembles the regulatory pathway previously used in the development of cryptocurrency exchange-traded funds, although the proposed exemptions would still require individual assessment.
The growing importance of these products makes the regulatory debate particularly relevant to digital asset investors.
According to the report cited by the original publication, S&P Global data showed that assets deposited in vaults reached approximately $131 billion in April 2026. This figure illustrates the increasing financial activity taking place through these investment structures.
Even highly automated systems remain exposed to smart contract vulnerabilities, liquidity shortages, market volatility, oracle failures and other technical risks.
The CCI itself acknowledges that transparency and permissionless withdrawals do not eliminate these dangers.
There is also the possibility that some platforms may need to change their operating structures if regulators determine that their activities fall within existing securities requirements.
The practical lesson is to examine the underlying investment strategy, withdrawal conditions, operator permissions and security arrangements before committing capital.
The proposed framework could eventually help establish more predictable standards for the sector, but its implementation will depend on how regulators respond.
The Crypto Council for Innovation’s October proposal represents another important development in the relationship between decentralised finance and traditional financial regulation.
With support from Bitwise, Galaxy Digital and Morpho, the initiative seeks to establish a more practical way of determining when blockchain-based investment products should face US securities requirements.
Although the recommendations do not introduce binding regulations, they provide regulators with a detailed framework for evaluating operator authority and investor protection.
The outcome could influence the future availability, structure and oversight of these investment opportunities. The industry’s next challenge will be finding a balance between protecting investors and preserving the technological advantages that make decentralised finance attractive.
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