The Crypto Council for Innovation (CCI) has proposed a framework for bringing crypto vaults within U.S. securities laws, arguing that blockchain-based operation alone should not exempt them from regulation. Its 238-page report, published on 29th October, examines vault structures under the Securities Act of 1933, the Investment Company Act of 1940, and the Investment Advisers Act of 1940. Crypto vaults are smart contracts (self-executing blockchain code) that accept token deposits and deploy them through strategies including lending, borrowing, and investments to generate returns. Their use is expanding beyond DeFi (decentralized finance), with traditional financial institutions also exploring them. S&P Global said assets deposited in vaults reached $131 billion in April 2026. Developed with members from Bitwise, Galaxy Digital, and Morpho, the CCI proposal uses a two-sided Control Framework that assesses operator authority and investor control. It examines four operator factors—mandate, execution, governance, and disposition—and six depositor conditions: comprehensibility, verifiability, observability, predictability, notice, and actionability. Vaults with immutable code, transparent operations, limited human discretion, and permissionless withdrawals would receive a different regulatory assessment from structures in which operators retain significant investment control. The proposal draws on Section 10301 of the proposed CLARITY Act and calls for the SEC (U.S. securities regulator) to use an approach similar to its treatment of ETFs, beginning with individual exemptions under Section 6(c) of the Investment Company Act before developing broader standardized rules. Bitwise CEO Hunter Horsley said vaults will change capital markets and that the company is pleased to participate. The proposal also echoes SEC Commissioner Hester Peirce’s 22nd July statement, Headstands and Summervaults, which cautioned against treating all crypto vaults alike. The CCI’s position comes as Web3 protocols including Hyperliquid, Aave, and Polygon face criticism for moving away from openness, permissionlessness, and decentralization by emphasizing internal vaults, buybacks, and treasury accumulation over direct value distribution to token holders.