The Sanction Hyperboloid of Hyperliquid: Blocking Based on the Principle of "Guilty by Association" Threatens to Spread to Bybit
The actions of the derivative platform Hyperliquid regarding compliance with British sanctions against the HTX exchange have sparked a wave of criticism in the crypto community. The situation has shifted from compliance measures to outright absurdity: wallets that have only indirectly interacted with the sanctioned exchange are being blocked. Moreover, I believe the next target for such a radical interpretation could be addresses associated with Bybit.
The Essence of the Complaints: Law Above Common Sense
Let me recall the background. In May 2026, the UK imposed sanctions against Huobi Global S.A., a company linked to HTX, accusing it of facilitating the circumvention of restrictions by Russia. Local virtual asset service providers (VASPs) were affected. Hyperliquid, registered in Singapore and with no direct ties to the UK, decided to play it safe but, as it turned out, overstepped the mark.
An analyst under the pseudonym "as required" has thoroughly analyzed the situation. According to their data, Hyperliquid blocks any wallet that has somehow interacted with addresses that contacted HTX after May 26. The number of intermediate transactions does not matter. An example is given of an investor named Duldul Capital, whose wallet was frozen solely because they lent funds to a friend who, in turn, interacted with HTX. This is a classic case of overly broad application of sanctions legislation.
Why Did Hyperliquid Go Beyond the Law?
It is important to note: Hyperliquid is not a British company. It is not obligated to blindly replicate the interpretation of UK sanctions, especially in such an expanded form. "As required" debunked the myth that the platform is acting on the orders of analytical companies like Chainalysis. They contacted several compliance organizations, all of which confirmed: they only provide factual labels ("wallet interacted with HTX"), but do not decide which specific addresses to block. This decision lies entirely and solely with Hyperliquid.
Significantly, other platforms have found a more reasonable approach. The marketplace OpenSea unblocked the analyst's wallets within hours of the request. The exchanges Lighter and Extended did not block the same addresses at all. This proves that a transparent appeals procedure does not create legal risks for a platform but, on the contrary, demonstrates its good faith and willingness to engage in dialogue.
Escalation of Absurdity: Bybit in the Crosshairs
"As required" took Hyperliquid's logic to its ironic extreme. They suggested that since "insignificant" wallets are being blocked, the platform might now start targeting anyone who deposited or withdrew funds via Bybit after June 17. It is worth recalling that the Singaporean regulator MAS recently added Bybit Fintech Limited to its investor alert list. Thus, Bybit, being the world's largest exchange, could become the next "victim" of Hyperliquid's excessive zeal.
My comment: The situation with Hyperliquid is a stark example of how fear of regulators and misinterpretation of rules can undermine trust in decentralized finance. A platform that positions itself as a tool for expanding financial opportunities is, in reality, depriving users of access to their funds without the right to defense. This is a dangerous precedent that could force many to reconsider their risks when working with such protocols. Instead of building bridges, Hyperliquid is erecting walls, and the next entity on this "sanctions list" could be anyone.