- Paradigm and the Hyperliquid Policy Center jointly asked FinCEN and OFAC to narrow secondary-market obligations in a stablecoin anti-money-laundering rule proposed in April.
- The groups back applying most issuer duties to the primary market but warn the draft could make issuers liable for DeFi transfers they cannot see or stop.
- The rule implements the GENIUS Act, signed in July 2025, which treats permitted payment stablecoin issuers as financial institutions under the Bank Secrecy Act.
Paradigm and the Hyperliquid Policy Center have urged U.S. regulators to revise a proposed anti-money-laundering rule they argue could unfairly hold stablecoin issuers liable for transactions on public blockchains they cannot effectively monitor, in a comment letter filed this week with the Treasury Department.
The rule, proposed jointly in April by the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), implements parts of the GENIUS Act.
Signed into law in July 2025, that law treats permitted payment stablecoin issuers as financial institutions under the Bank Secrecy Act, subjecting them to AML and sanctions-compliance obligations.
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Support With Limits
The two groups said they broadly support the proposal and FinCEN’s decision to tailor most issuer obligations to the primary market, the point where issuers mint and redeem tokens and know their customers directly. Their objection centers on the secondary market, where stablecoins move freely across decentralised protocols after issuance.
In their view, the draft could treat smart-contract interactions in decentralised finance as if an issuer were providing a service at every step of a transaction.
That framing, they argue, would expose issuers to liability for transfers they do not control, cannot clearly see, and cannot realistically stop on permissionless blockchains.
To address the gap, Paradigm and the Hyperliquid Policy Center recommended that OFAC narrow its treatment of smart-contract interactions and that regulators tighten the definition of “payment stablecoin-related activity.”
They also urged that Suspicious Activity Report obligations stay limited to the primary market.
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