Industry backlash is intensifying over the U.S. Treasury's proposed GENIUS Act sub-regulations concerning AML/CFT and sanctions provisions. Following a joint comment letter submitted by Paradigm and the Hyperliquid Policy Center (HPC), Anchorage Digital has also voiced its concerns. The core of the dispute is the issue of 'Secondary Market Liability' for issuers.

The currently proposed rules leave room to interpret asset movements via smart contracts as continuous 'service provision.' In this scenario, stablecoin issuers would be held liable for compliance regarding all transactions in secondary markets (DEXs and peer-to-peer wallet transfers) that they cannot directly control. This is akin to a structure where a bank, after allowing a customer to withdraw cash, must track and remain responsible for every path that cash takes.

If such regulations are strictly enforced, the impact on the market will be substantial. U.S.-based regulated stablecoin issuers (such as USDC) may, in an effort to avoid regulatory risk, withdraw assets from open DeFi pools and likely restrict issuance to KYC-compliant private networks or permissioned platforms.

Ultimately, this could result in severely limiting the usability of U.S.-regulated assets. We cannot exclude the risk of a counterproductive outcome where offshore, unregulated stablecoins fill the liquidity void in the DeFi ecosystem and dominate market share. As this regulatory friction goes beyond mere anti-money laundering and threatens the very existence of permissionless financial structures, it is essential to monitor the future direction of this legislation closely.