The U.S. Securities and Exchange Commission (SEC) has closed its investigation into Aave Protocol without recommending enforcement actions, according to a notice dated December 16.
The decision concludes an investigation that has lasted several years into the operations of one of the largest decentralized finance (DeFi) lending platforms, removing a significant regulatory risk across the sector.
Investigation concluded without action
The SEC stated in its notice that it has decided to close the investigation into Aave Protocol and currently does not intend to recommend enforcement actions.
However, the agency emphasized that ending the investigation does not mean release from liability nor does it prevent possible future actions if circumstances change. The announcement follows the SEC's standard practice in accordance with Securities Act Release No. 5310.
The investigation began around 2021–2022, during which the SEC increased its oversight of crypto lending, staking, and governance tokens.
Aave is a non-custodial DeFi protocol that allows for the lending and borrowing of digital assets through automated smart contracts. The protocol operates without intermediaries, and its governance is in the hands of AAVE token holders.
The SEC's decision comes at a time when Aave is facing separate internal discussions about revenue and governance.
Earlier this week, DAO members raised concerns that changes to the user interface infrastructure may have diverted swap fee revenues away from the Aave DAO treasury. This was a transition from ParaSwap to CoW Swap in Aave's official user interface.
Governance delegates estimate that the change could reduce DAO revenues by up to $10 million per year, depending on trading volume.
Aave Labs responded that the user interface is a separate product and that the previous revenue sharing was voluntary.
Currently, Aave is navigating regulatory oversight without repercussions, which has been typical as the SEC has withdrawn from enforcement actions regarding cryptocurrencies under Paul Atkins.
The protocol still faces open questions regarding governance structure, decentralization, and value capture as DeFi evolves.
