Hyperliquid Policy Center and Paradigm urge Treasury to narrow stablecoin rules for DeFi

Hyperliquid Policy Center and Paradigm have jointly submitted recommendations to the U.S. Treasury urging narrower stablecoin regulations that would preserve DeFi access for American-issued stablecoins. The advocacy highlights growing concern that overly broad regulatory frameworks could push U.S. stablecoin issuers toward offshore structures and away from decentralized finance applications.

The push by Hyperliquid Policy Center and Paradigm represents a critical juncture in stablecoin regulation as policymakers worldwide tighten oversight of digital assets. Both organizations recognize that poorly tailored Treasury guidelines could inadvertently fragment the U.S. stablecoin market, encouraging domestic issuers to relocate operations or abandon DeFi integrations altogether. This advocacy effort addresses a fundamental tension: regulators seek to ensure financial stability and consumer protection, while industry participants argue that blanket restrictions stifle innovation in decentralized finance ecosystems.

The regulatory pressure on stablecoins stems from broader concerns about systemic risk, illicit activity, and the absence of traditional banking safeguards in DeFi protocols. However, stablecoins serve legitimate functions as on-ramp mechanisms, collateral, and settlement layers across decentralized applications. When regulations become too restrictive without distinguishing between genuinely risky practices and routine DeFi operations, compliant U.S. issuers face a competitive disadvantage against less-regulated offshore alternatives.

This policy intervention carries material implications for the DeFi sector's trajectory in the United States. If stablecoin issuers cannot operate effectively within domestic regulatory frameworks while maintaining DeFi connectivity, liquidity and trading volumes could migrate to international platforms, reducing U.S. market competitiveness. The outcome of Treasury's rule-making will signal whether American regulators intend to foster responsible crypto innovation or effectively offshore critical financial infrastructure. Industry stakeholders will monitor whether policymakers adopt targeted regulations addressing specific risks versus categorical prohibitions that eliminate entire use cases.

• →Hyperliquid Policy Center and Paradigm advocate for regulatory narrowing to prevent U.S. stablecoin issuers from abandoning DeFi.
• →Overly broad Treasury stablecoin rules risk pushing compliant American issuers toward offshore alternatives.
• →The regulatory approach will determine whether DeFi liquidity concentrates in U.S. or international markets.
• →Current stablecoin oversight addresses systemic concerns but may inadvertently restrict legitimate decentralized finance activities.
• →Treasury's rule-making outcome will signal U.S. commitment to responsible crypto innovation versus restrictive prohibition.