Hyperliquid is going overboard with sanctions: following HTX, Bybit has come under fire.
The decentralized exchange Hyperliquid has found itself at the center of a scandal triggered by its own overly zealous approach to sanctions compliance. The issue involves the blocking of wallets that had only an indirect or mediated connection to the crypto exchange HTX, and it now appears that users linked to Bybit could also be targeted.
The situation reached a boiling point after the UK imposed sanctions on Huobi Global S.A., a company associated with HTX, in May 2026, on suspicion of facilitating the circumvention of restrictions by Russia. Hyperliquid, registered in Singapore and not a British legal entity, nonetheless began blocking any addresses that had in any way interacted with HTX after that date — even through a chain of dozens of intermediate transactions.
An interpretation of sanctions that goes beyond the law
As independent experts note, the UK sanctions directly apply only to local Virtual Asset Service Providers (VASPs). Hyperliquid, however, went much further, blocking users for any, even the most insignificant, connection to HTX, without providing an adequate mechanism for appeal. A striking example is the case of investor Duldul Capital, whose wallet was blocked simply because he lent funds to a friend whose wallet was, in turn, linked to HTX.
Hyperliquid's logic, taken to an absurd extreme, could lead to the blocking of millions of wallets that have ever interacted with Bybit — the second-largest centralized exchange in the world. The Singapore regulator MAS has already placed Bybit on its investor alert list, which, according to critics, makes it the next target.
Double standards and lack of transparency
It is important to emphasize that Hyperliquid makes these decisions independently. Analytical firms such as Chainalysis or TRM Labs provide only factual labels regarding interaction with HTX, but do not dictate which specific addresses to block. Unlike Hyperliquid, other platforms, including OpenSea and several exchanges, have either completely refrained from mass blocking or have promptly unblocked wallets after reviewing appeals.
Prominent on-chain researcher ZachXBT rightly noted that such an approach devalues the very idea of risk assessment in blockchain. Compliance systems are now forced to label tens of thousands of ordinary wallets as "high-risk" simply for having once come into contact with the exchange, which contradicts the philosophy of decentralized finance.
Cryptalist expert opinion: Hyperliquid's actions are a dangerous precedent. By demonstrating excessive zeal in sanctions compliance, the platform not only undermines user trust but also creates a risk for the entire DeFi ecosystem. Instead of expanding financial opportunities, it deprives people of access to their funds without the right to defense, ultimately playing into the hands of the centralized structures against which the crypto revolution was conceived.