Jeff Yan's Plan to Bring the Entire Financial Industry Onto Hyperliquid

Jeff Yan · Hyperliquid Labs

The current US administration wants to take a proactive approach to on-chain rails for finance.

Yan reads the CFTC's stated wish to bring the protocol to the US as a sign that the current administration sees on-chain rails as a way to improve markets. He argues the US should not take an extremely restrictive view of the technology and should instead find ways to incorporate it into the existing financial system. He also notes that Hyperliquid's terms of service currently bar US users from its derivatives trading, which is the barrier the CFTC is pointing at.

“I think the current administration wants to kind of take a proactive approach towards on chain rails for finance.”at 8:41

Jeff Yan · Hyperliquid Labs

Regulation should attach to the deployer layer that exercises controls, not to the underlying protocol.

Jeff says he can see a world where deployers, not the protocol, are regulated, as with CFTC or CME oversight. He compares this to TCP/IP, a technology used to build financial stacks that is not itself regulated. Regulation sits where controls are exercised, and deployers are the ones exercising them over their markets. He also argues regulators are conservative and still learning the technology, but may come to see its benefits. For example, anyone can provably audit that user balances sum to the USDC held at an address. He calls this a property rather than a process, which he says is beneficial.

“I can very much see that world... in the same way that Internet technology, TCP IP, for example, is a technology... it is not regulated. Right? The regulation sits at the layer where there are controls.”at 59:58

Jeff Yan · Hyperliquid Labs

Perpetual futures have crossed into broad acceptance, including in traditional finance.

Yan says that centralized crypto exchanges offering perpetual futures showed clear product-market fit, because users benefited from and wanted the product. He argues that perps have now crossed a threshold of acceptance and are being seen in traditional finance as well. He presents this as the reason on-chain perps can bridge the user experience of centralized venues with the self-custody and transparency of blockchains.

“I think now you see this in traditional context where I think perps have kind of, like, crossed that threshold of acceptance, which is which is really, really cool.”at 31:20

Jeff Yan · Hyperliquid Labs

Large perp-to-spot volume gaps are healthy because arbitrageurs will trade price dislocations away.

Jeff rejects the idea that perpetual futures volume must be capped relative to the underlying spot market. He points to S&P 500 futures and ETFs, which trade far more than their underlying components, as evidence the gap is healthy. The key requirement is that smart liquidity providers can trade against any price move that does not reflect underlying value. In his view, a thinly traded underlying does not matter, because market makers would happily trade a 1% dislocation away. This lets price discovery happen on the derivative while the underlying still reflects real value.

“I don't actually think that's true. I think you can... I think it's healthy. And if you look at, for example, you know, futures tracking the S and P 500 versus the underlying components or even ETFs, right, like, there is a big volume differential there.”at 52:59

Jeff Yan · Hyperliquid Labs

Mega-cap IPOs capture most wealth creation, and limited retail access to them is a system failing.

Yan argues that this year's IPOs show how wealth is being created at a large scale but gatekept. When trillion-dollar companies go public, most of the wealth creation has already happened by that point. He calls it a failing or limitation of the existing system that very few people can trade these opportunities before the IPO. He says the gatekeeping is a byproduct of how markets work rather than deliberate, and he presents on-chain access as a way to widen participation, while acknowledging that futures and tracking products do not carry the same cash flows as owning shares.

“if you have trillion dollar, 2,000,000,000,000, $3,000,000,000,000 companies IPO ing, you can pretty confidently say that most of the wealth creation has happened at that point.”at 27:36

Jeff Yan · Hyperliquid Labs

Traditional financial institutions will adopt onchain infrastructure rather than be displaced by it.

Jeff pushes back on calling firms like Van Eck, Round Hill and State Street 'legacy,' since that implies they will be disrupted or displaced. He argues these institutions have strong brand trust and relationships with users, and that those should not change. It is in their interest to adopt new technology that improves their offering. He draws an analogy to AWS: early enterprise pushback against cloud gave way to widespread adoption, so he expects institutions to deploy markets on new infrastructure over time.

“I would push back on them being, quote, unquote, legacy... the institutions you mentioned have great relationships with a bunch of their users... It's in their interest to adopt new technology that improves their offering.”at 58:34