The US Securities and Exchange Commission has concluded its investigation of the Aave Protocol without recommending any actions, according to a notice dated December 16.
The decision concludes a multi-year investigation of one of the largest decentralized finance platforms (DeFi) for lending and removes significant regulatory uncertainty for the sector.
Investigation concluded without enforcement
In its notice, the SEC stated that their investigation of the Aave Protocol has concluded, and that they currently have no intention of recommending any actions.
The agency emphasized, however, that the conclusion does not imply exoneration and also does not exclude future action if circumstances change. The notice follows standard practice at the SEC under Securities Act Release No. 5310.
The investigation started around 2021–2022, during a period when the SEC tightened oversight of cryptocurrency lending, staking, and governance tokens.
Aave, a non-custodial DeFi protocol, allows users to lend and borrow digital assets through automated smart contracts. The protocol operates without intermediaries and is governed by holders of the AAVE token.
The SEC's decision comes at the same time as Aave faces internal scrutiny regarding revenue and governance.
Earlier this week, DAO members expressed concern that a change in the front-end infrastructure may have redirected swap fee revenues away from Aave DAO's treasury. The issue arose after a transition from ParaSwap to CoW Swap on Aave's official interface.
Governance delegates believed the change could reduce DAO revenues by up to $10,000,000 annually, depending on trading volume.
Aave Labs responded that the front-end is a separate product and that previous revenue sharing was voluntary.
So far, Aave is coming out of regulatory scrutiny without penalty, which has been common after the SEC has partially withdrawn from cryptocurrency measures under Paul Atkins.
However, the protocol faces ongoing questions around governance, decentralization, and value creation as the DeFi model matures.
