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Stablecoin Regulation News
The Hyperliquid Policy Center and venture capital firm Paradigm have formally asked the US Treasury to revise its proposed Anti-Money Laundering (AML) rule for stablecoin issuers. The two organizations submitted a joint comment letter on June 9, responding to a draft rule the Treasury proposed in April 2026.
That rule would require stablecoin issuers to block, freeze, or reject transactions that violate US law or sanctions. The obligation would apply to both primary and secondary markets under the current draft. Primary market participants are issuers who hold direct customer information and can act on it.
Issuers Cannot Police the Secondary Market
Hyperliquid and Paradigm said they support placing AML compliance obligations on primary market participants. They argued that the secondary market is a different environment, where issuers can only observe wallet addresses and transaction data. The two organizations said issuers cannot meaningfully police activity at that level
The Financial Crimes Enforcement Network (FinCEN) has already outlined a limited approach to secondary market compliance. Hyperliquid and Paradigm said that approach is the correct standard. They argued the same principle should apply when agencies implement AML and sanctions rules for stablecoins deployed to permissionless environments.
The letter also addresses how the draft treats smart contract interactions. Under the proposal, those interactions would carry sanctions liability regardless of whether an issuer has any relationship with the transacting parties. Hyperliquid and Paradigm said that standard is unworkable in practice.
US Stablecoins Could Exit DeFi Under Current Draft
The two organizations warned of a structural risk if the rule takes effect as written. An issuer facing those obligations would be incentivized to deploy only into permissioned environments. That shift would remove US-regulated stablecoins from decentralized finance (DeFi) entirely. Hyperliquid and Paradigm argued the resulting gap would be filled by unregulated, offshore, non-dollar alternatives.
The GENIUS Act was signed into law in 2025, establishing a regulatory framework for stablecoins and their issuers in the US. Federal agencies are currently working through implementation, with the law set to take effect no later than January 2027.
The Senate is separately debating the <a href="https://xpertsstudio.com/xrp-clarity-act-meets-sec-push-for-crypto-market-integration/” title=”XRP CLARITY Act Meets SEC Push for Crypto Market Integration”>CLARITY Act, which could add rules for stablecoin issuers and remove developer liability for AML and sanctions compliance on crypto platforms. Some lawmakers are pushing for a full Senate floor vote before the November 2026 elections.
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Source: coinmarketcap.com