Morpho’s Paul Frambot faces pushback on vault classification proposal

Paul Frambot, CEO of the $16 billion DeFi lending protocol Morpho, proposed splitting onchain vaults into two regulatory categories on September 24. Within the hour, he had a small coalition of critics on his hands. Aave founder Stani Kulechov, crypto attorney Gabriel Shapiro, and several vault infrastructure builders all pushed back on the framework, arguing it mischaracterizes what “non-custodial” actually means and could benefit Morpho’s own product positioning at the expense of accurate taxonomy. The proposal and its logic Frambot’s framework divides onchain vaults into two buckets: non-custodial and discretionary. The distinction rests on how much latitude a vault’s curator, essentially the person or entity managing strategy, actually has over deposited funds. Non-custodial vaults, under this schema, would enforce strict code-level constraints. Think timelocks, mandatory exit periods for depositors, and immutable smart contracts that prevent a curator from unilaterally changing terms. The idea is that user control remains primary and managerial discretion is minimized to near zero. Discretionary vaults sit on the other end of the spectrum. Managers in this category would retai...