‘Market integrity’ or DeFi risk? Paradigm, HPC question stablecoin rule scope

The Hyperliquid Policy Center and venture capital firm Paradigm submitted a joint comment letter to the U.S. Treasury regarding proposed stablecoin compliance rules linked to the GENIUS Act. While supporting the general framework, the organizations expressed concern that current proposals could inadvertently impose unworkable obligations on permissionless blockchain infrastructure and secondary market participants. The letter outlines six critical areas for improvement, specifically requesting clearer guidance on transaction blocking, sanctions compliance, and Customer Due Diligence requirements. By advocating for more precise definitions, the groups aim to prevent overly stringent regulations from stifling DeFi innovation or forcing operations into offshore jurisdictions. Furthermore, the commentary addresses the distinction between stablecoin issuers and third-party entities regarding yield distribution, noting that the proposed CLARITY Act seeks to preserve activity-based rewards. This regulatory dialogue highlights the ongoing tension between maintaining market integrity and preserving the functional nature of decentralized networks. As the New York State Department of Financial Services works to align its oversight with federal standards, these recommendations serve as a pivotal effort to ensure compliance frameworks remain compatible with blockchain technology.