The U.S. Securities and Exchange Commission has closed its investigation into the Aave protocol without recommending any enforcement action, according to a notice dated December 16.
This decision ends a multi-year investigation into one of the largest decentralized lending platforms for decentralized finance (DeFi) and lifts a significant regulatory burden on the sector.
Closing the investigation without enforcement
In its notice, the Securities and Exchange Commission stated that it has closed its investigation into the Aave protocol and does not intend to recommend any enforcement actions at this time.
However, the agency confirmed that the closure does not constitute exoneration nor prevent future actions if circumstances change. The notice follows the standard practice of the Securities Commission under the issuance of Securities Law No. 5310.
The investigation began around 2021–2022, during a period when the Securities and Exchange Commission intensified scrutiny on lending tokens and trading governance and cryptocurrencies.
Aave, a non-custodial DeFi protocol, allows users to lend and borrow digital assets via automated smart contracts. The protocol operates without intermediaries and is governed by AAVE token holders.
The SEC's decision comes at a time when Aave is facing a separate internal audit regarding revenues and governance.
Earlier this week, DAO members expressed concerns that a change in the front-end infrastructure may have diverted swap fee revenues away from the Aave DAO treasury. The issue arose after the shift from ParaSwap to CoW Swap on the official Aave interface.
Governance representatives said this change could reduce DAO revenues by up to 10 million dollars annually, depending on trading volume.
Aave Labs responded that the front end is a separate product and that previous revenue sharing was voluntary.
Currently, Aave emerges from regulatory scrutiny without penalties, a common pattern as the SEC retreats from enforcing cryptocurrency regulations under the leadership of Paul Atkins.
However, the protocol faces ongoing questions about governance, decentralization, and value capture as DeFi matures.
