The Hyperliquid Policy Center and Paradigm submitted a joint comment to the US Treasury on Tuesday, urging FinCEN and OFAC to narrow key parts of the proposed stablecoin compliance rule tied to the GENIUS Act. The firms argue that stablecoin issuers should not be on the hook for policing secondary-market transactions where they have no direct relationship with the counterparty.
Banking analogy for compliance
The comment draws a line familiar to traditional finance: know-your-customer checks should only be required at regulated on-ramps and off-ramps, not for every subsequent spending event. Trying to impose issuer-level screening on peer-to-peer transfers, the firms said, would generate large numbers of low-value suspicious activity reports — essentially noise that buries real red flags in false positives.
What 'lawful order' could mean
The filing also zeroes in on the definition of 'lawful order' in the draft rule. As written, the firms warn, the language could sweep in developers of distributed ledger protocols, decentralized self-custodial interfaces, and validators on networks like Ethereum, Hyperliquid, Solana, and Layer 2 systems. That kind of breadth, they argue, could make everyday protocol development a compliance risk.
Offshore stakes and blockbuilding risk
The comment paints a concrete picture of the unintended consequences. If the rule isn't clarified, US validator stakes would move offshore. US blockbuilding operations would relocate. The country's share of the chain validator base would shrink — the opposite of what the GENIUS Act's onshoring goals are supposed to achieve.
The Treasury has not yet set a date for a final rule. The comment period is open, and the industry is watching whether agencies adjust the text before it becomes binding.
