Crypto Innovation Council submits report to the SEC, recommending regulation of on-chain treasuries based on degree of human control

Foresight News reported, according to Crypto in America, that the Crypto Innovation Council (CCI) and members such as Bitwise, Galaxy Digital, and Morpho have submitted a 238-page report to the U.S. Securities and Exchange Commission (SEC), recommending that the degree of actual control operators have over investors' assets should be an important basis for determining how on-chain vaults are subject to securities laws. The report states that the greater the operator’s discretionary power over investment choices, lending terms, and fund flows, the stronger the justification for applying securities regulation.

For vaults that meet the definition of an investment company, CCI suggests that the SEC should draw on the ETF regulatory approach, first granting exemptions on a case-by-case basis before considering the development of broader rules. It should also clarify when vault operators must register as investment advisers, as well as the custody rules when smart contracts manage assets. The above constitutes industry recommendations, and it is still unclear whether the SEC will adopt them.