Aave founder Stani Kulechov has questioned Morpho’s proposed definition of non-custodial DeFi vaults, arguing that users may still face changes to how their funds are allocated.
His concern centers on the powers given to vault curators. Even with timelocks, Kulechov said managers could potentially expand allocations beyond the strategy users initially agreed to.
He also questioned whether users have enough visibility into those decisions. In his view, relying on implied approval could leave liquidity providers with limited control over how their funds are deployed.
Morpho Draws Two Vault Categories
Morpho has proposed dividing vaults into non-custodial and discretionary categories. Its non-custodial model relies on smart-contract rules, timelocks and exit periods before certain riskier allocation changes can take effect.
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The framework also includes role-based controls, in-kind withdrawals and immutable contracts as safeguards. Discretionary vaults, by contrast, give managers wider control over allocation, leverage and cross-chain strategies.
Kulechov takes a narrower view. He argued that a genuinely non-custodial vault should not have managers at all. He pointed to simple lending wrappers and early Yearn vaults as examples.
Debate Follows DeFi Risk Concerns
The discussion comes as institutions show greater interest in onchain capital allocation. Morpho says its vaults simplify lending across multiple isolated markets and more complex strategies.
Its proposal also argues that vault classifications should reflect how vaults actually operate rather than the labels attached to them. The framework seeks stronger security controls as protocols introduce new rates, maturities and strategies.
The debate also follows August liquidations involving roughly $36.39 million across Morpho’s PT-reUSD positions. Morpho’s current proposal, however, does not address that incident directly.
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