Bitwise and Galaxy Back New SEC Vault Rules

Crypto Council Proposes Vault Regulatory Framework

The Crypto Council for Innovation published a 238-page report Tuesday outlining how federal regulators can assess smart contract vaults under decades-old securities statutes. Public filings indicate the framework evaluates compliance against the Securities Act of 1,933, the Investment Company Act of 1,940, and the Investment Advisers Act of 1,940. Vaults accept user token deposits and deploy capital into automated financial strategies.

Market data compiled by S&P Global showed that assets locked in these yield-generating contracts touched $131B in April 2026. Traditional financial institutions are rapidly expanding operations into these automated structures. The new framework attempts to establish clear legal boundaries for institutional participation. Regulators received the detailed report immediately upon publication.

Industry Heavyweights Back Compliance Strategy

Executives from Bitwise, Galaxy Digital, and Morpho actively contributed to drafting the control-based regulatory guidelines for the digital asset sector. Bitwise CEO Hunter Horsley stated in published remarks that vaults will fundamentally alter capital markets infrastructure. The proposal argues that automated smart contracts should not automatically bypass federal oversight simply because they operate on decentralized networks.

The framework introduces a two-sided assessment model focusing on human operator authority versus investor control limits. Operator criteria evaluate mandate execution, asset disposition, and protocol governance rules. Depositor conditions measure transparency, verifiability, and permissionless withdrawal mechanics. Vaults featuring immutable code will face different regulatory scrutiny than discretionary operator models.

SEC Exemption Requests Target ETF Precedent

The CCI report draws direct regulatory parallels to Section 10,301 of the proposed CLARITY Act regarding identifiable protocol control groups. To achieve legal clarity, the coalition wants the SEC to replicate the approval path previously utilized for spot exchange-traded funds. Public statements from SEC Commissioner Hester Peirce previously cautioned against treating all automated vault structures identically. Coalition members intend to lobby for individual exemptions under Section 6(c) of the Investment Company Act.

Recent market reports from AMBCrypto highlighted a broader industry shift toward internal protocol treasuries and buyback models. Major Web3 protocols continue adjusting tokenomics away from direct user distributions. The CCI framework attempts to impose institutional standards across these evolving architectures. Market participants await official SEC responses to the proposed exemption pathways.