According to ME News, on October 29 (UTC+8), the Crypto Innovation Initiative (CCI) and its members, including Bitwise, Galaxy Digital, and Morpho, submitted a 238-page report to the U.S. Securities and Exchange Commission (SEC), recommending that the degree of operational control over investor assets be used as a key criterion for determining how securities laws apply to on-chain vaults. The report argues that the greater the operator’s discretionary authority over investment choices, lending terms, and fund flows, the stronger the justification for applying securities regulations.
For vaults that meet the definition of an investment company, CCI recommends that the SEC draw from the ETF regulatory pathway by granting case-by-case exemptions before considering broader rules, while also clarifying when vault operators must register as investment advisers and establishing custody rules for assets managed by smart contracts. These are industry recommendations, and it remains unclear whether the SEC will adopt them. (Source: Foresight News)
Crypto Innovation Council Submits 238-Page Report to SEC on Regulating On-Chain Vaults
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Summary
On October 29, 2026, the Crypto Innovation Council, alongside MetaEra, Bitwise, Galaxy Digital, and Morpho, submitted a 238-page report to the SEC on regulating on-chain vaults. The report contends that the level of operator control over investor assets should determine the application of securities laws. Greater operator discretion in investment selection, lending, and fund movements supports classification under securities regulation. For investment company vaults, the CCI recommends initially adopting the ETF model with applicable exemptions. The report also addresses advisor registration and custody requirements for smart contract assets. Risk-on assets and CFT compliance remain central to the SEC’s potential review. It remains uncertain whether the SEC will adopt these recommendations.
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