Hyperliquid and Paradigm Urge US Treasury to Revise Proposed AML Rule for Stablecoins
Hyperliquid Policy Center (HPC) and Paradigm have jointly asked the U.S. Treasury to modify a new proposed anti-money laundering (AML) rule. They argue that the current version places unfair strict liability on stablecoin issuers for transactions they cannot control, especially in decentralized finance (DeFi).
Background of the Proposed Rule
In April 2026, FinCEN and OFAC released a joint proposal to implement parts of the GENIUS Act. The rule aims to treat stablecoin issuers as financial institutions under the Bank Secrecy Act.
HPC and Paradigm support the overall approach, particularly the focus on primary market obligations where issuers can perform proper customer due diligence. However, they have concerns about the secondary market rules.
Key Concerns Raised
The letter highlights that extending issuer liability to secondary market activity through smart contracts creates problems:
- Issuers only see wallet addresses and transaction amounts on public blockchains.
- They cannot meaningfully police or stop these transactions.
- Strict liability may push issuers toward permissioned blockchains only.
- This shift could pull regulated U.S. stablecoins out of DeFi ecosystems.
- It risks creating space for unregulated offshore alternatives.
The groups warn that such rules could reverse recent progress in crypto regulation and harm innovation in permissionless blockchain infrastructure.
Recommendations from Hyperliquid and Paradigm
In their letter dated June 9, 2026, HPC and Paradigm made several practical suggestions:
- Narrow the definition of “payment stablecoin-related activity.”
- Reconsider OFAC’s treatment of smart contract interactions.
- Maintain a lighter regulatory touch for secondary market transactions on public blockchains.
- Ensure rules do not discourage deployment of stablecoins in DeFi environments.
