Paradigm and the Hyperliquid Policy Center filed a joint comment letter this week with the U.S. Treasury Department, urging regulators to revise a proposed anti-money-laundering rule for stablecoin issuers. The groups argue the rule could unfairly hold issuers liable for transactions on public blockchains they cannot effectively monitor. The rule was proposed jointly in April by the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) to implement parts of the GENIUS Act, signed into law in July 2025, which treats permitted payment stablecoin issuers as financial institutions under the Bank Secrecy Act and subjects them to AML and sanctions-compliance obligations.
Paradigm and Hyperliquid Policy Center Distinguish Primary and Secondary Market Obligations
The two groups said they broadly support the proposal and FinCEN's decision to tailor most issuer obligations to the primary market, the point where issuers mint and redeem tokens and know their customers directly. Their objection centers on the secondary market, where stablecoins move freely across decentralised protocols after issuance. In their view, the draft could treat smart-contract interactions in decentralised finance as if an issuer were providing a service at every step of a transaction. That framing would expose issuers to liability for transfers they do not control, cannot clearly see, and cannot realistically stop on permissionless blockchains.
Groups Recommend Three Regulatory Changes to Proposed Rule
To address the gap, Paradigm and the Hyperliquid Policy Center recommended that OFAC narrow its treatment of smart-contract interactions and that regulators tighten the definition of "payment stablecoin-related activity." They also urged that Suspicious Activity Report obligations stay limited to the primary market.
FAQ
What did Paradigm and the Hyperliquid Policy Center ask U.S. regulators to do?
Paradigm and the Hyperliquid Policy Center filed a joint comment letter this week with the U.S. Treasury Department, asking FinCEN and OFAC to revise a proposed anti-money-laundering rule for stablecoin issuers. The groups want regulators to narrow secondary-market obligations to avoid holding issuers liable for transactions on public blockchains they cannot effectively monitor.
What specific changes did the groups recommend to the proposed stablecoin AML rule?
The groups recommended three changes: OFAC should narrow its treatment of smart-contract interactions, regulators should tighten the definition of "payment stablecoin-related activity," and Suspicious Activity Report obligations should stay limited to the primary market where issuers mint and redeem tokens directly with known customers.
Why do Paradigm and the Hyperliquid Policy Center support primary-market obligations but oppose secondary-market requirements?
The groups support primary-market obligations because issuers mint and redeem tokens at that point and know their customers directly. They oppose secondary-market requirements because stablecoins move freely across decentralised protocols after issuance, and the draft rule could expose issuers to liability for transfers they do not control, cannot clearly see, and cannot realistically stop on permissionless blockchains.
