Author: Shenchao TechFlow
According to Bloomberg’s exclusive interview, Jeff Yan, founder of the decentralized perpetual derivatives platform Hyperliquid, stated in a solo interview with Bloomberg’s Odd Lots podcast that U.S. financial regulators should assign compliance obligations for crypto derivatives trading to the entities that build and operate specific financial markets on the Hyperliquid blockchain, rather than treating the entire underlying blockchain network as a centralized exchange subject to regulation. This position reflects the protocol’s defensive strategy to accelerate integration with mainstream Wall Street capital while avoiding the burdensome compliance requirements of fully licensed financial institutions.
Decoupling the protocol layer from the application layer: Avoiding the regulatory burden of traditional exchange licenses
As U.S. regulators intensify their long-arm jurisdiction over offshore crypto trading platforms, the legal distinction between decentralized trading protocols and centralized exchanges has become a focal point of contention.
In the interview, Jeff Yan proposed a layered regulatory defense: Hyperliquid’s underlying Layer 1 network is analogous to open internet communication protocols (such as TCP/IP), responsible only for verifying transaction states and storing data availability; whereas the matching engine deployed on this chain, liquidity providers, front-end interfaces, and market makers or hedge funds that directly interact with end investors are legal entities performing financial intermediary functions.
Under this architectural design, compliance scrutiny should directly target the participants engaged in actual financial intermediary activities, requiring them to fulfill anti-money laundering (AML) and know-your-customer (KYC) obligations. According to the technical specifications in Hyperliquid's official L1 architecture and validator documentation, by positioning the public blockchain底层 as a purely neutral computational foundation, Hyperliquid aims to ensure that its open-source validator network is shielded from direct regulatory enforcement actions by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission.
Wall Street's demand for entry versus compliance tensions with offshore decentralized networks
As one of the largest on-chain decentralized derivatives platforms by trading volume, Hyperliquid maintains tens of billions of dollars in open interest daily, and its core liquidity pool is increasingly attracting capital from traditional hedge funds and quantitative market makers.
Due to the lack of compliant offshore intermediary qualifications, direct access by large regulated capital to native decentralized ledgers faces significant compliance friction. Jeff Yan’s proposed pathway aims to establish a two-tier market structure: allowing licensed Wall Street financial institutions to autonomously build sub-markets compliant with U.S. regulations on their high-performance L1 chains, with these licensed institutions solely responsible for customer onboarding and regulatory reporting, while the public chain continues to operate in a permissionless manner.
Dispute over U.S. regulatory jurisdiction and hearing procedure milestones
Washington’s regulatory core has not fully accepted the liability disclaimers of decentralized protocols. Based on enforcement precedents for unregistered trading facilities outlined in the U.S. Commodity Futures Trading Commission (CFTC) regulatory guidance, federal regulators tend to pierce the veil of decentralized governance and presume the core development teams that actively drive and maintain protocol operations as the primary responsible parties.
Currently, bipartisan members of the U.S. Congress are conducting closed-door reviews of legislative details regarding the inclusion of offshore derivatives platforms within the domestic regulatory framework. The subsequent phase of evaluation and testimony by the U.S. Senate Committee on Agriculture on the classification of decentralized derivatives infrastructure is scheduled to take place on November 18 Beijing time, on the official day of the U.S. Congress reconvening.