The Hyperliquid Policy Center and crypto investment firm Paradigm have urged U.S. Treasury officials to revise proposed anti-money-laundering (AML) rules tied to the GENIUS Act, warning that the requirements as drafted are too burdensome for stablecoin issuers and could limit how decentralized stablecoins operate on public blockchains.
In their submissions, the two groups argued that the Treasury's framework would impose compliance obligations that are impractical for permissionless networks, where issuers do not control how tokens move between wallets. They asked regulators to narrow the scope before the rules are finalized.
What the groups are arguing
The Hyperliquid Policy Center, a lobby group backed by the Hyperliquid ecosystem, and Paradigm contend that strict AML obligations designed for traditional financial intermediaries do not map cleanly onto open blockchain infrastructure. They say forcing issuers to police every downstream transaction would be technically unworkable and could push compliant projects offshore or out of the U.S. market entirely.
Their central concern is that decentralized stablecoins — tokens issued and circulated without a central gatekeeper able to freeze or screen transfers — would effectively be unable to comply, even if the issuers themselves follow the rules. The result, they warn, could be a regulatory regime that favors centralized, permissioned issuers and squeezes DeFi participants.
Why it matters
The GENIUS Act established a federal framework for payment stablecoins, and the accompanying Treasury rulemaking is one of the most consequential pieces of U.S. crypto policy still being finalized. How AML requirements are written will shape which issuers can operate domestically, how DeFi protocols handle compliance, and whether dollar-pegged tokens on public chains remain viable for U.S.-linked entities.
Stablecoins have become core settlement infrastructure across crypto markets, used for trading, lending and cross-border transfers. Rules that constrain their issuance or movement could ripple through exchanges, DeFi platforms and on-chain liquidity broadly.
What's next
The Treasury is expected to weigh public comments before issuing final rules. Industry participants are likely to continue lobbying for carve-outs that distinguish permissionless protocols from centralized issuers, though the timeline and final shape of the rules remain unsettled.