The Hyperliquid Policy Center and Paradigm have asked the U.S. Treasury to narrow parts of its proposed anti-money laundering rules for stablecoin issuers.
Summary
- Hyperliquid and Paradigm want secondary-market duties narrowed because issuers cannot identify every DeFi transaction participant.
- Treasury’s proposal requires stablecoin issuers to maintain AML programs and block transactions violating U.S. law.
- The groups warn strict rules could shift regulated stablecoin liquidity toward permissioned or offshore alternatives.
The groups said the draft could place duties on issuers for transactions they cannot control.
Their June 9 letter supports stronger checks where issuers deal with customers. However, it argues that the same approach should not automatically cover transfers through wallets, decentralized exchanges and smart contracts.
Groups challenge GENIUS Act stablecoin rule
FinCEN and the Office of Foreign Assets Control proposed the rule in April to implement the GENIUS Act. It would require permitted stablecoin issuers to maintain anti-money laundering and sanctions programs.
The proposal also requires issuers to keep systems that can block, freeze or reject transactions that breach U.S. law. Hyperliquid and Paradigm said those duties need clearer limits when tokens circulate outside an issuer’s service.
“The same principle should guide the agencies’ implementation of AML and sanctions requirements,” the groups said.
They argued that primary-market activity gives issuers customer records and control over issuance and redemption. Secondary markets often show only wallet addresses, transaction values and contract interactions.
Letter warns regulated stablecoins could leave DeFi
The groups said the proposed approach could make issuers responsible for smart contract activity even when they have no relationship with users. They warned that such exposure could discourage issuers from supporting open networks.
“Issuers are subject to strict liability for transactions they cannot meaningfully police,” the letter said.
According to the filing, issuers may respond by limiting tokens to permissioned systems where participants undergo identity checks. The groups said that outcome could move regulated dollar stablecoins away from DeFi and leave room for offshore alternatives.
As crypto.news previously reported, Treasury’s proposed stablecoin AML rules would require bank-style controls across primary and secondary markets. The draft remains under review and may change after public comments.
CLARITY Act debate adds pressure to rulemaking
The dispute comes as lawmakers continue work on the CLARITY Act. The Senate proposal includes protections for open-source developers and service providers that do not control customer funds.
As previously reported, Solana Institute CEO Kristin Smith urged senators to preserve those developer protections. More than 200 crypto companies and organizations have backed efforts to advance the bill.
The Senate Banking Committee advanced the CLARITY Act in May, but a full Senate vote has not occurred. Lawmakers continue to debate stablecoin rewards, anti-money laundering safeguards and protections for decentralized software.
The GENIUS Act became law in July 2025 and created a federal framework for payment stablecoins. Its operating rules will shape how regulated issuers manage transactions across controlled platforms and permissionless blockchain networks.
