Key Takeaways:
Former Binance CEO Changpeng Zhao said Hyperliquid's no-KYC model is "awesome" but warned the platform could face legal scrutiny for pairing minimal identity checks with decentralization claims — a risk he knows firsthand after Binance paid $4.3 billion to settle US anti-money laundering charges.
Changpeng "CZ" Zhao, the former chief executive officer of Binance, praised blockchain-based perpetual futures exchange Hyperliquid as "awesome" but said he would never run a platform that operates without Know Your Customer checks, according to a preview of an upcoming interview with Galaxy Research's Alex Thorn posted to X on June 16.
"I would never do what they do given what I've experienced in my life," said Zhao, who pleaded guilty in November 2023 to causing Binance to fail to maintain an effective anti-money laundering program. "I assume they have good lawyers. They are making a lot of money." Zhao added that Binance cannot compete with Hyperliquid because the latter does not require identity verification, saying: "They don't have KYC. They claim to be decentralized."
Zhao's comments come from direct experience. Binance agreed to pay more than $4.3 billion to resolve US allegations tied to anti-money laundering and sanctions violations in November 2023, while Zhao personally received a four-month prison sentence. He was later pardoned by President Donald Trump in October 2025 — a move former Justice Department pardon attorney Liz Oyer described as "unprecedented" corruption due to the overlap between Binance's and Trump-linked crypto venture World Liberty Financial's business dealings.
The warning arrives as Hyperliquid has become one of the biggest success stories in crypto over the past two years, attracting billions in trading volume by offering perpetual futures trading without the identity checks that regulated exchanges like Binance and Coinbase require. But the line between centralized control and decentralized presentation is often blurrier than crypto marketing suggests, and regulators have shown they can reach platforms that operate without proper compliance.
The regulatory precedent is clear
Hyperliquid is far from the first crypto trading venue to face consequences for lax KYC and AML standards. In January 2025, crypto exchange KuCoin pleaded guilty to operating an unlicensed money-transmitting business, agreeing to pay nearly $300 million in fines and exit the US market for at least two years. Around the same time, BitMEX was fined $100 million for willfully violating the Bank Secrecy Act by operating without proper identity checks.
What makes the current moment more complex is that pushing trading activity onto a blockchain and wrapping it in decentralization branding does not necessarily shield platforms from legal exposure. Coinbase's Base network, for example, operates as a layer-two Ethereum chain where Coinbase acts as the sole sequencer, collects all fees, and maintains a close business relationship with Circle, the issuer of the USDC stablecoin that dominates the ecosystem. The same structural concentration exists in Hyperliquid's model, which uses USDC as collateral for its perpetual futures markets.
Notably, Zhao himself is an adviser to Aster and a holder of its crypto token — a platform similar to Hyperliquid that initially operated on BNB Chain, the Binance-affiliated crypto network. Aster launched its own blockchain in March, making its architecture more directly comparable to Hyperliquid's vertically integrated exchange-and-blockchain model.
Hyperliquid has taken some steps toward engaging with regulators. The newly established Hyperliquid Policy Center, which describes itself as an independent organization but was funded with $28 million worth of HYPE tokens by the Hyper Foundation, is advocating for a regulated US path to on-chain derivatives markets. Meanwhile, Duke Law lecturing fellow Lee Reiners has argued that pending crypto legislation could give Trump-linked projects room to maneuver, though ethics-related concerns from Democrats appear to be slowing the legislation's progress in the Senate.
This article is for informational purposes only and does not constitute investment advice.
