Peirce Urges Privacy Protections in Crypto Financial Surveillance at SEC Roundtable

SEC Commissioner Hester Peirce spoke at the Crypto Task Force's sixth roundtable on December 15, 2024, addressing financial surveillance and privacy in cryptocurrency transactions. Ms. Peirce argued that government should not assume criminal intent when people protect their financial privacy, should resist forcing intermediation to facilitate surveillance, and should avoid imposing Bank Secrecy Act obligations on software developers who lack custody of user assets.

Ms. Peirce claimed that legal developments, particularly the third-party doctrine, have made mass financial surveillance routine while similar protections exist for physical homes. She asserted that crypto is forcing a reassessment of financial privacy because tokenized securities transactions can occur without broker intermediation, reducing government access to transaction information through traditional channels. Ms. Peirce said that while public blockchains are viewable by everyone, new privacy-protecting tools like zero-knowledge proofs and mixers enable law-abiding citizens to conduct legal transactions privately.

Ms. Peirce noted that the recently passed GENIUS Act, which regulates centralized stablecoins, directs Treasury to identify innovative methods that regulated financial institutions use to detect illicit activity involving digital assets. She said the President's Working Group on Digital Asset Markets determined that software developers without total independent control over value should not be considered money transmitters under the BSA. Ms. Peirce claimed government should pursue bad actors who use privacy tools for nefarious purposes while protecting developers who publish these tools and law-abiding citizens who use them.