Hyperbole of Sanctions: Hyperliquid goes overboard with wallet blocks, and Bybit could be affected
The situation regarding compliance with the sanctions regime in the crypto market is beginning to take on grotesque forms. The decentralized platform Hyperliquid, registered in Singapore, has launched a massive campaign to block wallets that had any transactional connection whatsoever with the HTX exchange. My analysis shows that this approach is not only excessive but also creates a dangerous precedent for the entire industry.
At the heart of the conflict are UK sanctions imposed on May 26, 2026, against Huobi Global S.A. (associated with HTX) for allegedly aiding Russia in circumventing restrictions, including transferring funds totaling over $1.5 billion through the so-called A7 network. Under UK rules, these restrictions apply to local virtual asset service providers (VASPs).
Why Hyperliquid's actions are drawing widespread criticism
The problem is that Hyperliquid, not being a UK company, decided to apply the strictest interpretation of the sanctions. The platform began blocking any wallets that indirectly interacted with addresses linked to HTX after the specified date, regardless of the number of intermediate transfers. This has resulted in even users who simply lent funds to a friend, whose wallet once contacted HTX, being caught in the crossfire.
As independent researchers, notably ZachXBT, point out, this policy has effectively devalued risk assessment on the blockchain. Compliance systems now label numerous ordinary wallets as "high-risk" simply for having once come into contact with the exchange. Notably, other platforms, such as OpenSea, found a mechanism to review decisions and unblocked wallets within hours, while exchanges Lighter and Extended did not block those same addresses at all.
Bybit in the crosshairs: the next round?
Hyperliquid's logic, taken to an absurd extreme, suggests that if millions of wallets are considered "insignificant," then it should block everyone who deposited or withdrew funds through Bybit—the world's second-largest exchange—after June 17. The Singapore regulator MAS has already added Bybit Fintech Limited to its investor alert list. This creates an alarming precedent: if Hyperliquid continues in the same vein, users of one of the largest centralized platforms could be blocked.
My expert assessment: Hyperliquid demonstrates a dangerous tilt towards excessive compliance, which contradicts the very idea of decentralized finance. Sanctions are a tool that requires a balanced approach, not the blind application of a "shotgun." The lack of a transparent appeals procedure and the willingness to block wallets based on indirect connections undermines trust in the platform and creates risks for the entire DeFi ecosystem. The market needs clear and fair rules, not a game of "sanctions poker" where ordinary users lose.