Hyperliquid, Paradigm Urge Treasury to Revise AML Rule

Paradigm and Hyperliquid Policy Center submitted a letter to the U.S. Treasury urging revisions to proposed anti-money laundering (AML) rules for stablecoin issuers. The groups argue that secondary market liability requirements would impose unreasonable obligations on issuers who lack visibility into transactions beyond the primary issuance stage, while supporting FinCEN's primary market compliance focus.

The regulatory push to strengthen AML compliance for stablecoins represents a critical inflection point for the cryptocurrency industry's relationship with U.S. financial oversight. Paradigm and Hyperliquid's intervention signals growing friction between regulators seeking comprehensive transaction monitoring and market participants arguing for workable compliance frameworks. The distinction between primary and secondary market obligations lies at the heart of this debate—issuers control who receives newly minted stablecoins but cannot feasibly monitor subsequent peer-to-peer transfers without invasive surveillance mechanisms that would fundamentally alter how digital assets function.

This dispute reflects the broader tension between regulatory intent and technical reality. Treasury and FinCEN aim to prevent stablecoins from facilitating illicit activity, a legitimate goal that drove recent legislative efforts. However, imposing liability for secondary market transactions creates a compliance paradox: issuers would be held responsible for behavior they cannot directly observe or control. This mirrors traditional financial regulation debates about bank liability for customer-to-customer wire transfers, but stablecoins operate without traditional intermediaries.

For the cryptocurrency ecosystem, this outcome carries material consequences. Overly restrictive AML rules could force stablecoin issuers toward invasive KYC requirements or transaction freezes, features incompatible with blockchain's pseudonymous design. Conversely, inadequate oversight creates genuine risks for regulatory backlash and potential stablecoin restrictions. The Treasury's decision on this comment period will likely shape whether stablecoin adoption accelerates or faces legislative headwinds in 2024-2025.

• →Paradigm and Hyperliquid challenged Treasury's proposed secondary market AML liability for stablecoin issuers as impractical and uncontrollable.
• →The groups support primary market compliance where issuers maintain customer knowledge but oppose liability extending to peer-to-peer transactions.
• →This represents a critical regulatory negotiation that could determine stablecoin operational feasibility in the United States.
• →Stricter AML rules risk forcing invasive KYC procedures incompatible with blockchain-native design principles.
• →Treasury's response to this advocacy will signal the regulatory trajectory for stablecoin integration into traditional finance.