Hyperliquid and Paradigm challenge GENIUS AML proposal

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.