Hyperliquid Policy Center and Paradigm submitted a joint comment on the proposed rule by FinCEN and the OFAC regarding the implementation of GENIUS Act requirements for payment stablecoin issuers.
The authors of the letter generally supported the idea of concentrating most issuer obligations on the primary market where there is a direct relationship with the customer. At the same time, they requested to narrow and clarify several requirements for the secondary market to “avoid unnecessary burdens” on public blockchains and DeFi.
The companies proposed maintaining the approach where issuers are not required to file Suspicious Activity Reports (SAR) for secondary operations. The Travel Rule should also apply to pseudonymous transfers between wallets if operators do not have direct relationships with transaction participants.
Additionally, the organizations suggested expanding the “safe harbor” for voluntary data sharing with regulators to include protocol developers, self-custody storage interfaces, and other infrastructure services.
Separately, the letter proposed recognizing compliance measures at the smart contract level as sufficient, including transfer restrictions and address blocklists. The authors requested clarification that money laundering provisions do not apply to developers, protocol participants, and other on-chain infrastructure levels.
The proposed rule by FinCEN and OFAC was published on April 8. The document implements GENIUS Act requirements for AML/CFT and sanctions compliance for payment stablecoin issuers.
The provisions require issuers to submit SARs, have the technical ability to block, freeze, and reject prohibited transactions, comply with lawful government orders, and maintain an effective sanctions compliance program.
Back in June, the non-profit Blockchain Association sent an open letter to US Senate leaders John Thune and Chuck Schumer urging the swift passage of the CLARITY Act.