Crypto investment firm Paradigm and the Hyperliquid Policy Center have asked U.S. regulators to be careful when setting stablecoin rules under the GENIUS Act. They warn that broad compliance requirements could hurt decentralized finance (DeFi).
In a joint letter to FinCEN and OFAC, they supported stronger anti-money laundering rules but said some parts of the law could place unrealistic demands on stablecoin issuers and blockchain infrastructure providers. Their main concern is how regulators will handle stablecoin activity in decentralized markets.
The GENIUS Act set up a framework for regulating payment stablecoins in the U.S. Regulators are now working out the detailed rules for how the law will work in practice.
Paradigm and Hyperliquid generally support FinCEN’s approach, which puts compliance duties on stablecoin issuers in the primary market. In this setup, issuers have direct relationships with customers and can handle identity checks and compliance.
However, the firms are worried about how OFAC’s proposed rules might affect activity in the secondary market. This includes transfers between wallets, exchanges, and DeFi protocols, where issuers have little or no control.
The letter says blockchain systems are different from traditional finance because transactions often happen automatically through smart contracts. Making issuers responsible for transactions they can’t monitor or stop could cause major legal and operational problems.
The firms also warned that making developers, validators, and protocol operators follow compliance rules could slow down innovation in the U.S. crypto sector.
To address these issues, they suggest limiting reporting requirements to the primary market, giving safe-harbour protections to DeFi developers, and making sure regulations match how decentralized blockchain systems actually work.
As regulators keep working on the rules, the debate shows how hard it is to balance financial oversight with innovation in the fast-changing stablecoin and DeFi sectors.
Today we filed a comment with @paradigm on @USTreasury‘s proposed rule for stablecoin issuers.
U.S.-regulated stablecoins power billions of dollars in daily trading, lending, and settlement.
Our comment offers recommendations to preserve their critical role in onchain markets. https://t.co/tFJhhkdpq5
— Hyperliquid Policy Center (@HyperliquidPC) June 9, 2026
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