The Hyperliquid Policy Center (HPC) and crypto investment firm Paradigm jointly filed a comment letter with the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) on June 9, urging federal regulators to scale back proposed sanctions obligations that the two organizations say would effectively force US-regulated stablecoins off public blockchain networks. The letter, submitted on the final day for public comments, targets a joint rulemaking by FinCEN and OFAC that would impose AML/CFT (anti-money laundering/countering the financing of terrorism) and sanctions compliance obligations on licensed stablecoin issuers under the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act).

What the Rule Would Do

The GENIUS Act, signed into law on July 18, 2025, created the first federal licensing framework for payment stablecoins in the United States. It restricts issuance to regulated entities called Permitted Payment Stablecoin Issuers (PPSIs) and explicitly requires them to run sanctions compliance programs. In April 2026, FinCEN and OFAC published a proposed rule spelling out what those programs must include.

FinCEN's portion was notable for what it did not include. The agency specifically declined to extend Suspicious Activity Report (SAR) filing requirements to secondary market activity, recognizing that doing so would flood law enforcement with excessive defensive reports with limited law enforcement value. OFAC's section is another matter. Critics say OFAC's proposed secondary market obligations would hold issuers liable for transactions flowing through smart contracts (self-executing code on public blockchains) that the issuers have no technical ability to monitor or block at the individual transaction level.

A significant ambiguity underlies this dispute: neither the statute nor the NPRM meaningfully addresses how compliance obligations apply to decentralized protocols operating without a central intermediary. That gap is central to why HPC and Paradigm argue the rule creates a compliance impossibility for open-network issuers.

The Core Objection

HPC and Paradigm argue in their letter that OFAC's approach would subject stablecoin issuers "to strict liability for transactions they cannot meaningfully police." The distinction matters because of how stablecoins actually move in practice. When a company like Circle issues USDC directly to an institutional client, it knows who that client is and can run standard identity checks. Once those tokens enter the open market and begin moving between wallets or through DeFi protocols, Circle sees only wallet addresses and transaction amounts. It has no customer relationship with most of the people transacting and no technical mechanism to intercept individual transfers.

The letter warns that an issuer facing obligations it cannot realistically meet will have a strong financial incentive to deploy only to permissioned, walled-off networks rather than open public blockchains. The practical result, as the authors frame it: "pulling U.S.-regulated stablecoins out of DeFi and creating a void filled by unregulated, offshore, non-dollar alternatives."

Specific Asks

The organizations made six concrete recommendations. They want SAR obligations confined to the primary market, a narrower definition of "payment stablecoin-related activity," and a reconsideration of how OFAC treats smart contract interactions. They also called for safe harbor protections for DeFi developers and decentralized protocols, formal recognition of on-chain blacklist and freeze functions as valid compliance tools, and clarification that secondary wallet users do not qualify as "customers" under the rule.

Who Is Behind the Letter

HPC is a Washington, D.C. nonprofit founded on February 18, 2026 and seeded by the Hyperliquid Foundation with one million HYPE tokens, worth roughly $28 to $29 million at launch. The organization is led by Jake Chervinsky, a well-known crypto attorney who previously served at the Blockchain Association and venture firm Variant. In a statement published by Fortune in February 2026, Chervinsky described the current regulatory environment as one where frameworks "were designed in an analog era and cannot account for new decentralized trading protocols not controlled by any single entity."

Paradigm is one of the most active crypto-focused investment firms in Washington policy circles, with a track record of submitting technically detailed comment letters to the SEC, CFTC, and Treasury.

As of June 9, HYPE was trading at approximately $64.41, giving Hyperliquid's native token a market cap near $14.25 billion. The network's total value locked stood at $1.56 billion on-chain, with bridged TVL reaching $8.54 billion.

Why This Matters Beyond the US

The debate in Washington carries direct consequences for users in regions where dollar-pegged stablecoins have become core financial infrastructure. Sub-Saharan Africa processed more than $200 billion in on-chain volume between mid-2024 and mid-2025, with stablecoins accounting for 43 percent of all crypto transactions. Nigeria alone recorded $59 billion in crypto activity over the 12 months to June 2024, received over $30 billion in flows to DeFi services, and led the world in DeFi inflows by country. In South Asia, total regional stablecoin volumes surpassed $4 trillion in the most recent reporting period, driven heavily by Gulf-to-South Asia remittance corridors.

For users in Nigeria, India, and Pakistan, as well as in Ethiopia, where retail stablecoin transfers grew 180 percent year-on-year in 2025 following a 30 percent devaluation of the birr, a retreat of US-regulated stablecoins from permissionless DeFi would mean higher remittance costs, reduced access to dollar-denominated savings, and greater reliance on less audited offshore alternatives. Average remittance fees in Sub-Saharan Africa already sit near 7.9 to 8.78 percent; stablecoin rails typically charge under one percent for the same corridors, reducing costs by as much as 85 percent.

The rule's stakes extend to business decisions already underway. Circle hired a dedicated Africa growth lead in May 2026, a move that could be directly complicated by compliance obligations that push US-regulated issuers away from permissionless networks. The letter also warns that overly broad compliance language could extend liability to DeFi developers and validators not covered by the GENIUS Act, a concern particularly relevant to South Asian developer communities that contribute substantially to DeFi protocol codebases.

What Comes Next

The comment period closed June 9. FinCEN and OFAC will now review submissions before finalizing the rule. The timeline for a final version remains unclear. For global DeFi users, the outcome will determine whether US-issued stablecoins remain part of the permissionless infrastructure they currently rely on, or whether that role gradually shifts to less regulated alternatives.