Hyperliquid founder proposes regulating firms on his blockchain, not the network itself

Hyperliquid’s founder is proposing a regulatory model that would place oversight on financial firms using his blockchain rather than the blockchain itself, potentially allowing Wall Street to build regulated trading businesses on the network without it becoming a registered exchange. The proposal could reshape how crypto infrastructure navigates U.S. regulation and sets a precedent for similar blockchain platforms seeking mainstream institutional adoption.

• Hyperliquid founder Jeff Yan proposed that U.S. regulators oversee financial firms on his blockchain rather than the network itself.
• Payward, Kraken’s parent company, plans to offer U.S. derivatives using Hyperliquid’s technology through a regulated exchange.
• Yan’s model would allow Wall Street firms to build regulated trading businesses on Hyperliquid without requiring the blockchain to register as an exchange.

• August Month when President Donald Trump said CFTC was working to bring Hyperliquid into the U.S.
• 2026 Year Yan outlined his regulatory proposal to Bloomberg, setting framework for institutional adoption.

Hyperliquid founder Jeff Yan on Thursday (October 15) proposed a regulatory framework in which U.S. authorities would oversee financial firms operating on his blockchain rather than regulating the blockchain network itself, according to reporting by CoinDesk. The approach would allow Wall Street institutions to build regulated trading markets on Hyperliquid’s infrastructure without requiring the network to become a registered exchange with the Commodity Futures Trading Commission.

The regulation sits at the layer where there are controls, and indeed the deployers are the ones that exercise these controls.

Jeff Yan, Hyperliquid founder, in an interview with Bloomberg

Yan drew a parallel to how financial firms use internet infrastructure: companies operating trading markets on Hyperliquid should bear responsibility for meeting regulatory requirements rather than pushing that burden onto the protocol layer. Hyperliquid’s perpetual futures trading platform remains closed to U.S. customers, a restriction that has limited its access to American retail and institutional traders.

Payward’s regulated derivatives offering validates the layered approach

Kraken’s parent company Payward is already moving forward with a model aligned to Yan’s framework. The firm plans to launch derivatives products using Hyperliquid’s technology through a regulated exchange available to U.S. investors, even though Hyperliquid’s native perpetual futures market itself remains unavailable domestically. This arrangement would effectively let a Commodity Futures Trading Commission regulated operator build on Hyperliquid’s infrastructure without the network having to navigate federal exchange registration.

Yan stressed that the proposal is not intended to disrupt existing market infrastructure. “We’re not trying to displace anything,” he told Bloomberg. “In fact, I think the technology can benefit everyone who currently operates markets in a more traditional setting.”

Trump administration pressure precedes Yan’s formal proposal

Yan’s regulatory framework comes months after President Donald Trump said in August (2026) that the CFTC was working to bring Hyperliquid into the U.S. under federal regulations. Trump’s statement signaled regulatory momentum that could have forced Hyperliquid to seek exchange status, a path that would have subjected the blockchain itself to stringent oversight. Yan’s proposal now offers an alternative: regulators could supervise individual market operators on the chain without classifying Hyperliquid as an exchange.

Whether the CFTC will adopt Yan’s layered regulatory model or pursue exchange registration for Hyperliquid remains unresolved, with the agency having made no public statement on the framework since Trump’s August comments.

The BlockWest read. Yan’s proposal shifts the regulatory burden away from the protocol layer to individual market operators, a structure that benefits both Hyperliquid and established financial firms seeking blockchain access without triggering full exchange classification. The test case is whether Payward’s CFTC-regulated derivatives platform can scale on Hyperliquid without prompting regulators to demand the blockchain itself register as an exchange.

BlockWest is a news publication. Nothing here is investment advice. Read our disclaimer and editorial policy.