Paradigm and Hyperliquid Policy Center Criticize GENIUS Act Stablecoin AML Proposal
Paradigm and the Hyperliquid Policy Center have expressed concerns regarding a proposed anti-money laundering rule for stablecoin issuers tied to the GENIUS Act. The groups argue that making issuers responsible for secondary market activities could discourage participation in decentralized finance, as reported by Decrypt.
On June 10, 2026, Paradigm and the Hyperliquid Policy Center submitted a formal comment to the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC). They criticized proposed rules related to the GENIUS Act, which focuses on anti-money laundering (AML) and sanctions compliance for stablecoin issuers.
The groups highlighted that classifying secondary market activities as issuer responsibilities could force regulated stablecoins to withdraw from permissionless decentralized finance (DeFi) platforms. They stated, "Such an approach could create a 'chilling effect' that discourages issuers from deploying to permissionless blockchains... pulling U.S.-regulated stablecoins out of DeFi." This concern points to a potential limitation on how stablecoins function within broader crypto ecosystems.
Paradigm and the Hyperliquid Policy Center proposed clearer distinctions between primary issuance—which involves direct relationships between issuers and customers—and secondary market activities, where stablecoins circulate via wallets, decentralized applications, and validators beyond the issuer’s control. They emphasized that entities such as protocol developers or wallet providers should not be held to the same regulations as issuers if they do not maintain direct relationships with stablecoin users.
The groups caution that applying issuer-centric regulations to secondary activities might overwhelm regulators with low-value reports of suspicious activities, referring to these as "an avalanche of noisy, false-positive-laden, low-value SARs," or suspicious activity reports. This could ultimately hinder the efficiency of regulatory oversight while stifling innovation in the growing DeFi space.
As the discourse progresses, observers within the crypto community are keen to see how U.S. regulatory frameworks evolve in response to these objections and what implications this might hold for the future landscape of stablecoin usage in DeFi.
Summary based on original reporting by Vince Dioquino at Decrypt, originally published Jun 10, 2026. SolanaWire does not republish source content.
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