In a conversation on Bloomberg’s Odd Lots podcast on October 15, 2026, Jeff Yan, founder of the decentralized derivatives platform Hyperliquid, shared a notable perspective on how US regulators should approach specialized blockchain networks in finance.
Jeff Yan’s core argument is that US lawmakers and market regulators should view Hyperliquid’s Layer 1 blockchain as a layer of shared financial infrastructure, similar to telecommunications rails or clearing networks, rather than imposing a regulatory framework that treats the entire distributed ledger as a traditional stock exchange.
Separating the Technological Infrastructure Layer and the Market Operating Layer
According to Jeff Yan, legal obligations and compliance responsibilities for anti-money laundering or investor protection need to be specifically applied to entities or businesses that directly create, deploy, and control trading markets on the network (market operators). The underlying protocol should only serve as a venue providing shared liquidity and transparently validating transactions using open-source code.
This perspective comes at a time when the market is witnessing shifts among major financial institutions. According to Bloomberg, Payward, the parent company of crypto exchange Kraken, is harboring plans to leverage Hyperliquid’s technology to launch futures and derivatives products serving US investors through an officially licensed exchange entity. This demonstrates that decentralized blockchain technology can fully serve as a backend processing layer for compliant financial institutions.
Hyperliquid itself currently maintains a policy blocking all users with US IP addresses or citizenship from accessing the project’s official trading interface to avoid legal issues with the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC). Jeff Yan affirmed that the project’s long-term goal is to provide complementary infrastructure for Wall Street institutions rather than seeking to confront or completely replace the existing financial system.
The Core Legal Debate Between Infrastructure and Applications
The debate sparked by Hyperliquid’s founder hits right at the biggest legal bottleneck in the decentralized finance (DeFi) industry for years: regulators often tend to hold open-source software development teams responsible whenever violations occur on the blockchain. If the boundary between infrastructure protocol builders and commercial application operators is not clearly demarcated, technology developers will always face the risk of being unfairly held criminally or civilly liable.
If the functional layered approach proposed by Jeff Yan is considered by US lawmakers, it could pave the way for deeper integration between DeFi and traditional finance (TradFi). Licensed institutions could confidently build financial products on open blockchains, while engineering teams could focus on refining infrastructure without fear of being held responsible for operating an unlicensed exchange.