How to uphold privacy — and how regulations should apply to blockchain technology — has become a central issue for regulators.
U.S. Securities and Exchange Commission Chair Paul Atkins said he believes there is a path forward that balances national security concerns with the preservation of individual privacy — but warned that excessive government involvement could tip the scales too far.
On Monday, at the SEC Crypto Task Force’s sixth crypto roundtable, Atkins cautioned that blockchains are particularly effective at linking transactions to senders. If steered in the wrong direction, Atkins said, crypto could “become the most powerful financial surveillance architecture ever invented.”
“Indeed, if the instinct of the government is to treat every wallet like a broker, every piece of software as an exchange, every transaction as a reportable event, and every protocol as a convenient surveillance node, then the government will transform this ecosystem into a financial panopticon,” Atkins said.
Still, Atkins said there was a way to balance innovation and privacy.
“Together, I am confident that we can shape a framework that ensures that neither technological nor financial advancements will come at the expense of personal freedoms,” Atkins said.
How to uphold privacy — and how regulations should apply to blockchain technology — has become a central issue for regulators. In August, Tornado Cash creator Roman Storm was found guilty on a money transmitting charge. Tornado Cash is a decentralized crypto mixing service designed to provide privacy for its users.
Since the verdict, crypto advocates have rallied behind Storm to get an appeal. The case has taken on added significance as the Justice Department’s stance on software developers has shifted under the Trump administration. In August, a statement was made by Matthew J Galeotti, acting assistant attorney general of the Justice Department’s Criminal Division, where he said “writing code” is not a crime. It’s unclear where the DOJ’s stance on Storm specifically goes next.
The debate over financial privacy has also drawn attention from other SEC officials. In August, SEC Commissioner Hester Peirce made the case for financial privacy in a speech and called on the government to “guard zealously people’s right to live private lives.” Throughout that speech, Peirce turned to the Fourth Amendment, which protects people from unreasonable government searches, safeguarding personal privacy.
On Monday, Peirce said protecting someone’s privacy should “be the norm.”
“Protecting one’s privacy should be the norm, not an indicator of criminal intent,” she said. “Government should resist the temptation to force intermediation for the purpose of creating a regulatory beachhead or facilitating financial surveillance.”
