Paradigm, Hyperliquid Policy Center Push Back on GENIUS Act Stablecoin AML Rule
Paradigm and the Hyperliquid Policy Center warned U.S. regulators that proposed stablecoin AML and sanctions rules could push regulated dollar tokens out of permissionless DeFi if issuers are held responsible for secondary-market activity. In a letter to FinCEN and OFAC, they argued the GENIUS Act framework should separate primary issuance from downstream transfers through wallets, DeFi apps, and validators that issuers do not control. They said wallets that only hold or transfer stablecoins should not be treated as issuer customers, and developers, protocol operators, and validators should not face issuer-like duties without a direct issuer relationship. They also warned the rule could produce excessive false-positive suspicious activity reports and create a chilling effect on deploying stablecoins on public blockchains. Critics noted, however, that broad carveouts could weaken sanctions enforcement and reduce incentives to block illicit use.
