Morpho plans to divide the on-chain vaults into two categories: non-custodial and customised.

What is the name of this movie? . . . ? . . ! . . .. . Morpho co-founder and CEO Paul Frambot proposed that on-chain vaults be divided into unmanaged and discretionary types, with Morpho Vaults falling under the former; Aave founder Stani Kulechov questioned whether this standard was too lax and self-serving. The controversy centers on whether users can opt out in a timely manner during administrator risk events. This disagreement also raises regulatory concerns over controls, opt-outs, and technical mechanism boundaries.

I'm not sure what to do with it. . . . ? . . ! . Morpho, Aave , on-chain Treasury and Supervision

Morpho co-founder and CEO Paul Frambot has proposed a on-chain vault classification framework, dividing the vaults into non-custodial vaults and discretionary vaults, arguing that Morpho Vaults belong to the former. Stani Kulechov, founder of Aave , immediately countered this standard as overly broad and self-serving; The Defiant reported on the controversy, which also involved an earlier division by SEC Commissioner Hester Peirce.[citation needed]

Classification proposal: Putting users' right to opt-out at the center

Frambot's division is not only based on whether a vault has an administrator, but also considers the ability of users to exit in a timely manner as a key boundary. According to him, unmanaged vaults mean that even if administrators are attacked, disconnected or maliciously manipulated, users can still opt out within a reasonable time; discretionary vaults give managers greater asset allocation and policy adjustment authority.

Morpho Vaults are classified as non-custodial by Frambot, based on time locks, guardians, permission controls, physical redemptions and immutable contracts. on-chain vaults are typically not simple wallets but contractual products of strategies or managers allocating funds in loan pools; if the manager's authority is excessive, user asset security, redemption pathways and earnings stability will be affected. Therefore, this definition attempts to distinguish risk hierarchies using a trustee's withdrawal ability rather than merely whether or not there is an administrator.

Criteria may be biased towards self-classification

Kulechov's objection is that he believes only vaults with no managers and relying primarily on default rules should be classified as non-trusted. According to this stricter standard, it would not be appropriate for a trustee to use the label "not trusted" if they are able to significantly influence asset allocation, market choices and policy adjustments.

He further points out that Frambot's division is too loose and self-serving, as the classification places Morpho Vaults itself in a non-trusted category. Aave is a large decentralized lending agreement with which Morpho's borrowing products are on an adjacent racetrack, so this argument goes beyond naming disputes to include user trust, product narratives and potential compliance boundaries.

Another layer of controversy is whether the technical mechanism supports a non-custodial claim. Time locks and guardians can reduce operational risk, but if permissions are set improperly, centralized control may still be possible; physical redemption and immutable contracts also enhance certainty, but how they're implemented will determine whether users can actually bypass administrator exit.

Regulatory variables: how control and opt-out are understood

Hester Peirce has previously suggested that a regulatory perspective may be shifting from the question of whether or not tokens are self-managed to more substantive questions: who controls assets, can users withdraw them in a timely manner, and can protocol permissions be unilaterally changed.

For the DeFi protocol, "non-trusted" is not a purely marketing term. It may influence external judgments about whether or not the agreement involves trusteeship, investment advisorships, securitization arrangements, or other regulatory obligations. If an on-chain vault emphasizes non-trustship in its publicity but has highly centralized authority, redemption reliance on managers and opaque contract upgrading paths, it could be subject to both compliance pressure and reputational risk.

The controversy also reminds the industry that vault classification cannot be based on conceptual labels alone, but needs to disclose specific permission structures. For example, what an administrator can do, what a guardian can suspend, how long time locks are, whether physical redemptions depend on front-end interfaces, whether contracts can be upgraded, and whether governance can change core rules will all affect whether or not trusteeship is established.

Follow-up: The debate on labels will move to product standards

The core issue in the dispute is to define boundaries: what counts as a self-exit within a reasonable amount of time? Does not having an administrator require full decentralized functionality? How does it differ from on-chain governance and authority upgrades that rely primarily on preset rules? If these criteria are unclear, classification may remain at the protocol's own level.

For general users, in addition to yields and borrowing markets, the focus should be on access control, exit mechanisms, contract upgrading pathways and redemption rules when judging on-chain vault risk. It is worth observing subsequently whether peers such as Aave will push for clearer classification standards, or whether regulators and auditors will form more detailed disclosure requirements around both control and withdrawal tiers.