Hyperliquid Policy Center and Paradigm filed a joint comment urging FinCEN and OFAC to narrow parts of a proposed stablecoin compliance rule tied to the GENIUS Act, warning that overly broad obligations could hurt DeFi and push US regulated stablecoins away from permissionless blockchains.
The comment broadly supports the agencies’ proposed rule for permitted payment stablecoin issuers, or PPSIs, particularly FinCEN’s decision to tailor most compliance obligations to the primary market. That includes activities where an issuer has a direct customer relationship, such as issuance, redemption, and custody.
The groups said the rule should preserve a clear distinction between primary market activity and secondary market activity. Secondary market activity includes downstream wallet transfers, decentralized exchange trades, and other transactions where the issuer’s smart contract is used but the issuer has no direct relationship with the parties involved.
HPC and Paradigm argued that compliance rules should follow the same logic used in traditional finance. A bank performs due diligence on customers who open accounts, but does not monitor how those customers spend cash after withdrawing it.
