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U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce said financial surveillance rules need to be rethought as crypto technology changes how much visibility the government has into users’ financials.
Commissioner Peirce made the comments on Monday, Dec. 15 at the sixth roundtable organized by the SEC’s Crypto Task Force, which was created this year and is led by the commissioner. Regulators met up in Washington, D.C. to discuss privacy, financial monitoring and the growing use of digital assets.
The discussion underscores growing agreement among experts and regulators that crypto will not see wider use unless people and businesses can feel like they can transact privately, without exposing sensitive financial information.
“Protecting one’s privacy should be the norm, not an indicator of criminal intent,” Peirce said in her speech. “Government should resist the temptation to force intermediation for the purpose of creating a regulatory beachhead or facilitating financial surveillance.”
Panelists like Katherine Kirkpatrick Bos, General Counsel of StarkWare, echoed Peirce’s view that seeking privacy is not a sign of wrongdoing, but a basic requirement for markets to move on-chain.
Privacy in Focus
In an exclusive interview with The Defiant, Kirkpatrick Bos said that the key takeaways from the roundtable are clear. First, there is an urgent economic need for privacy as markets increasingly move on-chain.
The demand for privacy became even more clear to a broader audience when privacy-focused tokens like Zcash (ZEC) outperformed the broader cryptocurrency market in recent months, suggesting traders are rotating into assets that protect on-chain confidentiality.
Second, Kirkpatrick Bos emphasized that “Americans have a right to privacy, so we need to change the narrative to make it clear that there should not be suspicion of individuals [or builders] using privacy tools or [building privacy tools].”
Third, she noted that the U.S. has created too many “honeypots” of personal information. “We've lost the thread on selecting disclosure, there's more information being produced and demanded than necessary, and we need to change that, potentially using privacy tools.”
Kirkpatrick Bos acknowledged that the challenge lies in balancing privacy with regulatory oversight. She said that while it’s important to ensure national security and prevent “the flow of dirty money” we need to also preserve what she called the “arguably more important need for privacy.”
United States v. Roman Storm
This very issue came into focus earlier this year during the Roman Storm case, in which Storm was accused of deliberately facilitating money laundering via the decentralized crypto mixer he co-founded, Tornado Cash.
Ultimately Storm was convicted of operating an unlicensed money-transmitting business in the U.S., however, the case raised concerns that developers of privacy-related tools — especially non-custodial platforms like Tornado Cash — could be held liable for how their software is used.
Despite these risks, demand for compliant privacy solutions is growing. In November, 0xbow, a privacy-focused decentralized finance platform, raised $3.5 million to expand Privacy Pools, which mix transactions while remaining regulatory-compliant.