Securities and Exchange Commission Commissioner Hester Peirce said financial oversight rules need to be reconsidered because cryptography changes how much the government can see into users’ finances.
Secretary Peirce made the comments on Monday, December 15, during the sixth roundtable hosted by the SEC Cryptographic Task Force, which was created this year and is led by the Secretary. Regulators met in Washington, D.C., to discuss privacy, financial oversight, and the growing use of digital assets.
The debate highlights a growing consensus among experts and regulators that the use of cryptocurrencies will not spread unless people and businesses feel able to transact privately without exposing sensitive financial information.
“Protecting privacy should be the norm and not an indication of criminal intent,” Peirce said in his speech. “Governments should resist the temptation to coercively intervene to provide a regulatory beachhead or facilitate financial oversight.”
Panelists, including Starware General Counsel Katherine Kirkpatrick Boss, echoed Peirce’s view that the pursuit of privacy is not a sign of fraud, but a fundamental requirement for markets to operate on-chain.
Focus on privacy
In an exclusive interview with The Defiant, Kirkpatrick Voss said the key takeaways from the roundtable were clear. First, as markets move on-chain, there is an urgent economic need for privacy.
In recent months, privacy-focused tokens like Zcash (ZEC) have outperformed the broader cryptocurrency market, making the demand for privacy even more apparent to a broader audience and suggesting traders are shifting toward assets that protect on-chain confidentiality.
Second, Kirkpatrick Voss emphasized, “We need to change the narrative to make clear that Americans have a right to privacy and should not be questioned about individuals (or contractors) using (or building) privacy tools.”
Third, he pointed out that the United States has created too many “honey pots” of personal information. “We have lost touch with our disclosure choices. More information is being created and requested than is necessary. We need to change this, in some cases using privacy tools.”
Kirkpatrick Voss acknowledged that balancing privacy and regulatory oversight is a challenge. She said that while ensuring national security and preventing “dirty money flows” was important, it was also necessary to maintain what she called “perhaps the more important need for privacy.”
America vs. Roman Storm
This very issue came to the fore earlier this year with the Roman Storm incident. In this case, Storm was accused of intentionally facilitating money laundering through Tornado Cash, a decentralized cryptocurrency mixer he co-founded.
Storm was ultimately convicted of operating an unlicensed money transfer business in the United States, but the case raised concerns that developers of privacy-related tools, particularly non-custodial platforms like Tornado Cash, could be held liable for how their software is used.
Despite these risks, the demand for compliant privacy solutions is growing. In November, 0xbow, a privacy-focused decentralized finance platform, raised $3.5 million to expand its privacy pool to mix transactions while complying with regulations.
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