Catenaa, Monday, June 15, 2026- The Hyperliquid Policy Center and venture capital firm Paradigm have warned U.S. regulators that proposed stablecoin compliance rules could create unintended burdens across the cryptocurrency ecosystem, arguing that key provisions risk extending anti-money laundering and sanctions requirements far beyond what Congress intended under the GENIUS Act.
The joint submission was made to the U.S. Treasury Department as regulators work to implement compliance standards for permitted payment stablecoin issuers, a category established under the recently enacted federal stablecoin framework.
While supporting efforts to combat illicit finance, Hyperliquid Policy Center and Paradigm said compliance obligations should remain focused on regulated entities that directly interact with customers.
The groups argued that stablecoin issuers should conduct due diligence on their own users but should not be required to monitor every transaction occurring in secondary markets.
According to the filing, extending compliance responsibilities into peer-to-peer trading environments would create significant operational challenges while generating large volumes of low-value suspicious activity reports.
The organizations warned that such an approach could overwhelm both stablecoin issuers and regulators with excessive reporting obligations.
The comment letter argues that compliance efforts should remain concentrated at regulated entry and exit points where customer relationships exist.
Paradigm and Hyperliquid compared stablecoins to traditional banking systems, where financial institutions perform know-your-customer checks when funds enter the financial system rather than monitoring every subsequent transaction.
They said decentralized transfers between users should generally not require additional compliance checks once assets move beyond regulated intermediaries.
Supporters of this approach argue it preserves financial oversight while reducing unnecessary burdens on innovation.
A second area of concern involves the Treasury proposal’s treatment of so-called lawful order requirements.
The organizations said current language could be interpreted broadly enough to impose obligations on blockchain validators, protocol developers, self-custodial wallet providers and other decentralized infrastructure participants.
According to the filing, that interpretation would conflict with congressional efforts to exclude many decentralized technologies from the definition of digital asset service providers.
The groups called for explicit clarification in the final rule.
Hyperliquid Policy Center and Paradigm warned that failing to clarify the proposal could encourage blockchain validators and infrastructure providers to relocate outside the United States.
Networks potentially affected include Ethereum, Solana, Hyperliquid and various Layer-2 scaling systems.
The organizations argued that excessive compliance requirements could reduce the U.S. share of global blockchain validation activity and undermine the GENIUS Act’s objective of encouraging digital asset development within the country.
The dispute highlights growing tensions between regulators and industry participants as federal agencies begin implementing stablecoin legislation.
Lawmakers and regulators broadly support stronger oversight of dollar-backed stablecoins, but significant disagreements remain over how far compliance obligations should extend into decentralized networks.
The debate is expected to intensify as regulators finalize rules governing the rapidly expanding stablecoin sector.
The GENIUS Act established the first comprehensive federal framework for stablecoin issuers in the United States. The legislation requires stablecoins to maintain reserve backing while complying with anti-money laundering and sanctions regulations. Hyperliquid Policy Center is a policy organization focused on digital asset regulation, while Paradigm is one of the largest venture capital firms investing in blockchain technology. The stablecoin market has grown into a critical component of the digital asset ecosystem, facilitating trading, payments and decentralized finance activity across multiple blockchain networks. Industry participants have generally supported regulatory clarity but continue to oppose measures they believe could restrict decentralized infrastructure or push innovation overseas.
