Paradigm and the Hyperliquid Policy Center are pushing the U.S. Treasury to rewrite part of a proposed anti-money laundering rule for stablecoin issuers. The draft rule, which landed on April 8, would implement the GENIUS Act by treating payment stablecoin issuers as financial institutions under the Bank Secrecy Act.
That means they would need anti-money laundering programs in place and must comply with sanctions requirements. But the controversy is over how far these duties should reach, especially once a stablecoin leaves its issuer and starts moving through decentralized platforms like Hyperliquid.
Treasury’s draft would require issuers to monitor stablecoin activity across distributed networks and maintain controls designed to prevent illicit finance risks. Paradigm and Hyperliquid say that goes too far, because many DeFi protocols run as software, not centralized intermediaries, and can’t control all activity that uses a regulated stablecoin.
Their joint letter, filed Tuesday, argues the stablecoin issuer or the actor actually controlling the network should bear direct responsibility, not every decentralized platform that touches the token after issuance.
The next phase is public comment. Treasury is giving crypto industry groups and advocacy orgs 60 days to argue for narrower language. The final outcome will help define how easily DeFi venues can keep working with regulated stablecoins as the new framework takes hold.