SEC Targets Decision-Making Authority in $25.9 Billion DeFi Market
SEC Commissioner Hester Peirce's recent statement has put on-chain treasuries and curators under regulatory scrutiny, potentially affecting $25.9 billion in DeFi products.
The Howey Test, a legal standard established in 1946, assesses the economic substance of how funds are raised and managed, which could be applied to on-chain treasuries and lending strategies under existing securities laws.
Curators, who decide how much capital is allocated where and what level of risk it's exposed to, hold genuine decision-making power over depositors' assets. The treasury itself is merely a tool for the curator to manage these assets.
If this legal reasoning is broadly applied, the impact will not stop at curators but extend to all discretionary products in DeFi, including liquid restaking operators and yield aggregators that consistently make decisions regarding asset selection and reallocation.