What are Hyperliquid and Paradigm asking regulators to change?

Hyperliquid Policy Center and Paradigm want the US Treasury to narrow proposed anti-money laundering and sanctions rules under the GENIUS Act. They argue stablecoin issuers should primarily be responsible for compliance in the primary market, where they directly interact with customers.

What is the GENIUS Act?

The GENIUS Act is a US law that establishes a regulatory framework for stablecoins and their issuers. Federal agencies are currently developing the rules that will determine how the law is implemented before it takes effect.

Why are Hyperliquid and Paradigm opposed to the proposed AML rules?

The groups argue the proposal places compliance responsibilities on stablecoin issuers for secondary market activity they cannot realistically monitor. They say issuers can see wallet addresses and transactions but often do not know the identities of the users involved.

What is the difference between primary and secondary stablecoin markets?

The primary market involves direct interactions between issuers and customers, where identity verification and compliance checks can be performed. The secondary market refers to peer-to-peer transfers, decentralised finance activity and other transactions that occur after a stablecoin enters circulation.

Why are DeFi advocates concerned about the proposal?

Hyperliquid and Paradigm warn that the rules could discourage stablecoin issuers from operating in permissionless blockchain environments. They argue this could reduce the availability of regulated US stablecoins across decentralised finance applications.

What are permissionless blockchain environments?

Permissionless blockchains allow anyone to access, transact and build applications without approval from a central authority. Most major DeFi protocols operate in these open environments rather than on restricted or permissioned networks.

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Hyperliquid and Paradigm challenge GENIUS AML proposal

Written by Liezl GambePublished Jun 10, 2026, 7:52 AM

The policy arm of crypto derivatives platform Hyperliquid and venture capital firm Paradigm have called on the US Treasury to revise proposed anti-money laundering and sanctions rules for stablecoin issuers under the GENIUS Act.

In a joint letter submitted on Tuesday, the organisations argued that compliance obligations should remain focused on the primary market, where stablecoin issuers maintain direct relationships with customers and possess relevant identity information.

“The same principle should guide the agencies’ implementation of AML and sanctions requirements for stablecoins deployed to permissionless environments,”

The groups said.

The comments respond to Treasury proposals released in April that would require stablecoin issuers to block, freeze or reject transactions that violate US laws or sanctions in both primary and secondary market activity.

Hyperliquid Policy Center and Paradigm argued that extending compliance responsibilities into secondary markets would force issuers to monitor activity they cannot effectively oversee because they only observe wallet addresses and blockchain transactions rather than the identities of users.

The groups also warned that treating smart contract interactions as sanctions-sensitive activity could push regulated stablecoin issuers toward permissioned blockchain environments and reduce participation in decentralised finance.

The debate comes as federal agencies continue implementing the GENIUS Act ahead of its expected January 2027 deadline, while lawmakers simultaneously negotiate additional digital asset legislation through the CLARITY Act that could further shape anti-money laundering obligations and developer liability standards across the crypto industry.

At the time of reporting, Hyperliquid price was $56.02.