Hyperliquid Founder Urges U.S. Regulators to Oversee Firms, Not Blockchain Networks

Jeff Yan, founder of the blockchain project Hyperliquid, has called for U.S. regulators to direct their oversight towards financial firms leveraging blockchain technology, rather than imposing regulations directly on the decentralized networks themselves. His comments, made in a Thursday interview, suggest a framework where the underlying infrastructure remains distinct from the regulated entities using it.

Yan articulated that companies operating trading markets on Hyperliquid should bear the responsibility for meeting regulatory requirements. He drew a parallel to the internet, where financial firms are regulated for their activities, not the internet infrastructure they utilize. This perspective aims to clarify the jurisdictional boundaries in the rapidly evolving digital asset landscape.

“The regulation sits at the layer where there are controls, and indeed the deployers are the ones that exercise these controls,” Yan stated. This emphasizes his view that accountability should reside with the operators who manage and deploy financial services on top of a blockchain, rather than with the open-source network itself.

Hyperliquid is widely recognized for its eponymous perpetual futures trading platform, which currently does not serve U.S. customers. Perpetual futures are a type of derivative contract that allows traders to speculate on the future price of an asset without an expiry date, offering continuous exposure.

Despite its direct platform being inaccessible to U.S. investors, Hyperliquid's technology is poised to enter the regulated U.S. market. Payward, the parent company of cryptocurrency exchange Kraken, plans to offer derivatives to U.S. investors using Hyperliquid’s underlying technology through a regulated exchange. This initiative could introduce a Commodity Futures Trading Commission (CFTC) regulated operator to the Hyperliquid ecosystem, even as its own perpetuals market remains closed to U.S. users.

Yan’s proposed regulatory framework could pave the way for established Wall Street firms to develop trading businesses on Hyperliquid without necessitating the blockchain itself to register as a regulated exchange. He stressed that Hyperliquid is not seeking to disrupt existing financial structures but rather to enhance them. “We’re not trying to displace anything,” Yan said, adding, “In fact, I think the technology can benefit everyone who currently operates markets in a more traditional setting.”

His remarks follow President Donald Trump’s announcement in August that the CFTC was actively working to bring Hyperliquid under federal regulations in the United States. This indicates a growing governmental interest in how decentralized finance (DeFi) platforms will integrate into the existing regulatory architecture.

Why it matters

Yan’s proposal addresses a critical and ongoing debate within the digital asset space: how to effectively regulate decentralized technologies without stifling innovation. By advocating for oversight at the application layer rather than the protocol layer, Hyperliquid seeks to provide a clear path for institutional adoption and broader integration of blockchain-based derivatives into mainstream finance. This distinction is crucial for defining legal liabilities and fostering a compliant environment for new financial products, potentially unlocking significant capital from traditional markets.

What to watch

Market participants will be closely monitoring how U.S. regulators, particularly the CFTC, respond to Yan’s suggested framework. The success of Kraken’s parent company, Payward, in launching regulated derivatives products utilizing Hyperliquid’s technology will serve as a key test case for this approach. Further developments in legislative efforts and regulatory guidance concerning decentralized finance will be pivotal in shaping the future of blockchain-based trading platforms in the United States.