Hyperliquid decentralized exchange founder Jeff Yan shared a clear stance with Bloomberg regarding the direction of crypto market regulation in the United States. Yan argued that US regulators should target financial entities operating markets on top of blockchains rather than burdening the underlying network with exchange rules. His remarks come in response to Washington’s moves after President Donald Trump noted in August that the Commodity Futures Trading Commission (CFTC) was working to bring Hyperliquid into the US federal regulatory framework.
Rather than opposing government oversight, Yan proposed a clear line of demarcation between protocol code and the commercial entities utilizing it.
Borrowing the Internet Infrastructure Oversight Model
To illustrate his vision, Yan compared blockchain architecture to internet infrastructure. On the web, legal obligations are never placed on underlying network protocols, but rather enforced directly at the application layer that maintains operational control over users. According to Yan, a similar approach should apply to crypto markets: regulators need only oversee financial intermediaries or operators managing markets, rather than forcing securities exchange status onto underlying network software.
Yan’s stance is closely tied to current operational limitations. Hyperliquid’s perpetual futures trading platform still blocks access for users and traders based in the United States to avoid legal conflict with local authorities.
Kraken’s Entry Point and Wall Street Opportunities
This separation of regulatory layers is already taking shape in concrete business plans. Payward, the parent company of the Kraken exchange, plans to leverage Hyperliquid technology to launch derivatives products for US investors through a regulated exchange.
The partnership allows for a market operator directly overseen by the CFTC within the Hyperliquid ecosystem. Under this framework, derivatives instruments can be accessed by American investors without requiring Hyperliquid’s main exchange to lift its geoblock or open its doors to US retail traders.
Yan’s proposal is also designed to meet the needs of traditional financial institutions. The setup paves the way for Wall Street players to build trading operations on top of Hyperliquid without forcing the blockchain network itself to register as a regulated securities exchange with market regulators.
For the crypto industry, the compromise from Hyperliquid’s founder highlights a new strategy to address pressure from Washington: shifting the compliance burden to licensed operators at the top layer, while keeping the underlying protocol operating as open infrastructure.
Reported via CoinDesk.
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Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
