Salman Banaei

Looking forward to building American onchain capital markets!

Strongly agree with @milesjennings. A few comments from someone also helping build vault infrastructure @plumenetwork for institutional use cases in particular. We made 101-level suggestions to @SECGov in September. I am grateful that @crypto_council, @Morpho, @KaminoFinance, and @veda_labs have put in the work to put together a graduate school-level seminar.

Mainstream finance and policymakers have been explicit that the prize of onchain finance is collateral mobility and utility, and they cannot capture it without legal certainty. GFMA and SIFMA estimate tokenization could free roughly $100B in collateral. DTCC calls tokenized collateral a way to unlock billions and transform liquidity management. MAS’s Project Guardian and IOSCO’s tokenization work point the same direction. Regulated institutions will not move size onto these rails on faith. Legal certainty is the unlock.

How do we get legal certainty? We need a pragmatic reconciliation of the vaults with the @SECGov regulatory perimeter. What matters is control, not code. Writing and publishing immutable, non-custodial smart contracts should never trigger regulatory obligations. Regulation should attach only where a centralized actor retains discretion after a user deposits and derives financial benefit from it: curating a vault, setting and reconfiguring parameters, intermediating returns. That is Miles’s point. If no one can unilaterally reconfigure the parameters, the user did not buy a security and the protocol is not an investment.

On the CCI versus Aave/Veda/Kamino strategy debate in this thread: these are complementary, not competing papers.

The Aave, Veda, and Kamino paper does the doctrinal work, showing why decentralized lending and non-custodial vaults do not fit the existing securities laws: no note under Reves, no common enterprise under Howey, no issuer under the 1940 Act, user-custodial throughout.

CCI’s “Under Control” framework takes the next step. For the cases where a person does retain control, it builds proportionate regulated pathways where none currently exist nor are likely to exist absent some acceptance of regulation. The pathways are calibrated to that control rather than defaulting to blanket registration, and it recognizes that fully immutable, non-custodial vaults can fall outside the statutes entirely. Nothing in it undermines DeFi. It puts guardrails where investment returns are intermediated, which is where accountability belongs.

Blanket relief is also not realistic for the subset of vaults that actually carry these risks. The Advisers Act exists to eliminate, or at least expose, the conflicts of interest inherent in investment advisory services. The 1940 Act’s declared policy targets pooled vehicles operated in the interest of insiders rather than investors and inadequate disclosure. Where a compensated curator exercises discretion, the SEC will not exempt it wholesale. Yes, DeFi infrastructure reduces many of the risks securities laws target, but they do not eliminate them. Hence the meme below from @ConcreteXYZ "If you don’t know where the yield comes from, you are the yield.”

That is precisely why control-calibrated pathways, not blanket exclusion, are the credible ask and far more likely to unlock regulated use cases.

The worry that a framework picks winners and losers has it backwards. Uncertainty is what picks winners, because it deters the entry of regulated institutions into this ecosystem. For DeFi use cases to grow, DeFi needs compliant pathways to integrate into mainstream finance.

I'll reiterate my core point: legal certainty is what unlocks institutional use of lend protocols and vaults, and legal theories that reach the end point of blanket deregulation are unlikely to earn much accommodation from this otherwise open-minded SEC. Look at how tepidly the agency has moved AMMs toward the regulated perimeter under the "Innovation Exemption."

Deep respect for the expertise of Miles, @TuongvyLe12, and @LindaJeng1, who have done as much as anyone to make these distinctions legible to regulators.

The CCI paper is not capitulation. It is how you give a risk-averse regulator @SECGov a reason to say yes to regulated use cases of lend protocols and vault infra.

Today we joined @Figure, @Securitize, Equiniti, and @centrifuge in a joint comment letter on the SEC’s transfer agent (TA) modernization proposal. We support the long-overdue update and recognition of blockchain recordkeeping for tokenized securities, but urge a fully principles-based approach to securityholder identification and communication.

Mandating KYC, i.e. name + physical mailing address, as a baseline is an outdated method for investor protection. Digital wallet addresses, emails, and other electronic identifiers can uniquely identify holders and enable reliable communication (often more effectively) especially for directly held tokenized holdings.

We also recommended multi-channel contact for lost holders (not mandatory physical-address database searches) and that AML/BSA goals stay with FinCEN, not this @SECGov rulemaking.

Full letter: sec.gov/comments/S7-20…

An observation from @TokenPolicyCTM: demand for tokenized products is the challenge for regulated institutions while supply of a wide range of tokenized products is the constraint from the perspective of those in the DeFi tokenized asset supply chain.

.@Figure has succeeded in creating a DeFi pipeline for tokenized assets.

144A HELOC and Auto ABS origination + offshore (Cayman) offerings into DeFi (Hastra/PRIME).

PRIME ~$560M TVL, ~$900M+ monthly volume. $15B+ tokenized.

This might be the first successful TradFi -> DeFi distribution supply chain, demonstrating DeFi as a source of liquidity for US HELOC ABS.