Treasury's Proposed AML Rules Spark Concerns Over Regulated Stablecoin Liquidity

The U.S. Treasury's proposal to implement the GENIUS Act has sparked controversy among stakeholders in the cryptocurrency industry. The Hyperliquid Policy Center and Paradigm have filed a joint comment, urging regulators to revisit certain aspects of the proposed rule.

According to the groups, the current draft imposes overly broad duties on stablecoin issuers, which could lead to unintended consequences. They argue that issuers should not be held accountable for transactions they cannot control, particularly in secondary markets where participants' identities are not disclosed.

The groups warn that strict enforcement of these rules could deter issuers from supporting open networks, ultimately driving regulated dollar stablecoins away from decentralized finance (DeFi). In contrast, permissioned systems and offshore alternatives may become more appealing to issuers seeking to mitigate risks.