Two major crypto firms have weighed in on the GENIUS Act, the US’s flagship stablecoin bill. Here’s what you need to know.
Hyperliquid Policy Center and venture firm Paradigm have submitted a joint comment to the US Treasury on proposed FinCEN and OFAC rules implementing the GENIUS Act for payment stablecoin issuers.
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Contents
Support for GENIUS Act — With Caveats
The organizations broadly endorsed the regulator’s approach of focusing issuer obligations on the primary market, where direct customer relationships exist. But they’re calling for much narrower and clearer requirements on the secondary market to avoid crushing public blockchains and DeFi.
“We support FinCEN’s decision to focus obligations on the primary market, but recommend clarifying or limiting certain secondary market requirements to avoid unintended consequences for permissionless blockchains and DeFi,” the letter states.
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Key Proposals from Hyperliquid and Paradigm
The firms want to see several key changes:
- Exempt issuers from filing Suspicious Activity Reports for secondary market transactions.
- Apply the Travel Rule only to pseudonymous wallet-to-wallet transfers where no direct relationship exists.
- Extend the safe harbor for voluntary data sharing with regulators to protocol developers, self-custody interfaces, and other infrastructure providers.
- Recognize smart contract-level compliance measures—like transfer restrictions and address blacklists—as sufficient.
- Make it explicit that money laundering provisions do not apply to developers, protocol participants, or other layers of on-chain infrastructure.
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The Risks of Overregulating Stablecoins
According to Hyperliquid and Paradigm, extending strict issuer liability to the secondary market through smart contracts would create “impossible obligations.” Issuers would be forced to launch stablecoins only on permissioned networks, effectively pushing regulated dollar stablecoins out of DeFi entirely. That would create a vacuum quickly filled by unregulated offshore alternatives.
The GENIUS Act passed last year, and implementation is ongoing. Full rollout is expected no later than January 2027. Meanwhile, the Senate is also debating the CLARITY Act, which could further shield open protocol developers from AML liability.
