The debate over how to regulate cryptocurrency has reached a new turning point. Jeff Yan, the CEO of Hyperliquid, has put forward a bold proposal: a U.S. compliance framework that targets the people running crypto platforms rather than the underlying blockchain technology. If adopted, this approach could fundamentally reshape how decentralized finance (DeFi) interacts with regulators.
Why Hyperliquid’s Compliance Plan Matters
Regulators around the world have long struggled with a core question: how do you oversee something that, by design, has no central authority? Traditional finance relies on banks, brokers, and clearinghouses β identifiable entities that can be licensed and audited. Blockchain, however, operates as a network of computers running software, with no single party in charge.
Jeff Yan’s proposal aims to bridge that gap. Instead of trying to regulate the chain itself β which he argues is technically impractical and legally ambiguous β his plan focuses on the operators: the companies, teams, and individuals who build interfaces, run validators, manage treasuries, or offer services on top of the blockchain.
This distinction is significant. It acknowledges that while a blockchain may be decentralized, the human beings interacting with users are not. Those operators can be held to the same standards as traditional financial intermediaries.
Key Pillars of Yan’s Regulatory Model
Yan outlined several core ideas in his compliance framework. Together, they paint a picture of a crypto industry that is more accountable to regulators without sacrificing the technological benefits of decentralization.
1. Licensing for Operators
The first pillar requires anyone offering financial services on top of a blockchain to obtain a license. This includes front-end platforms, custodial wallet providers, and order book operators. Think of it like requiring a taxi company to have a license, even though the road itself is a public utility β the infrastructure is open, but the business is regulated.
2. Anti-Money Laundering (AML) Standards
Operators would be required to implement know-your-customer (KYC) procedures and transaction monitoring. This is already standard practice at major exchanges like Kraken, and Yan’s plan would extend similar requirements across the DeFi ecosystem.
3. Clear Jurisdiction
One of the trickiest parts of crypto regulation is figuring out which country has authority over a global, borderless network. Yan’s plan suggests that jurisdiction should be tied to where the operator is based or where users are located β a practical approach that mirrors how international companies already handle compliance.
4. Consumer Protection
The framework also includes safeguards for retail users, such as disclosure requirements and dispute resolution mechanisms. This could help build trust among the millions of everyday investors who are still cautious about entering the crypto space.
What This Means for DeFi and Global Standards
DeFi β short for decentralized finance β has always positioned itself as the “wild west” of crypto: open, permissionless, and free from intermediaries. Yan’s model doesn’t try to tame the technology itself. Instead, it draws a line at the point where human operators enter the picture.
This is a meaningful philosophical shift. It says: the blockchain can remain free, but if you build a business on top of it and profit from it, you play by the rules. It’s similar to how the internet itself isn’t regulated, but e-commerce companies that process payments must follow financial laws.
If the U.S. adopts this framework, it could set a template for other countries. Regulatory clarity in America often influences global policy, and a balanced approach like this one might offer a middle ground between outright bans and complete laissez-faire.
The Challenges Ahead
Of course, no plan is without obstacles. Critics argue that regulating operators could push activity offshore, onto platforms that don’t comply. Others worry that defining who counts as an “operator” on a decentralized network is easier said than done.
There’s also the question of how self-custody fits in. If you’re a user who simply holds crypto in your own wallet β perhaps secured by a device like Ledger β you are not operating a service. Yan’s plan appears to leave self-custody untouched, which would be a win for crypto’s core values.
Looking Ahead: A Practical Path for Crypto
Jeff Yan’s proposal represents one of the most thoughtful attempts yet to reconcile crypto’s decentralized ethos with the regulatory needs of the real world. By focusing on operators rather than the chain, it offers a path that protects innovation while addressing legitimate concerns about fraud, money laundering, and consumer protection.
For the broader industry, the message is clear: the era of unregulated crypto businesses is coming to an end. Whether through Yan’s framework or a similar model, operators will increasingly be expected to meet the same standards as traditional financial institutions.
For users, this could mean a safer, more trustworthy DeFi ecosystem β one where you can still enjoy the benefits of decentralization, but with the security of knowing that the platforms you use are accountable to someone. Investors looking to engage with regulated crypto services can explore options like Bitvavo for compliant trading in Europe.
The coming years will reveal whether regulators embrace this operator-focused approach. But one thing is certain: the conversation about crypto compliance is no longer about whether to regulate β it’s about how.
