SEC crypto roundtable questions whether Americans can trade without giving up privacy

The U.S. Securities and Exchange Commission is holding a special task force roundtable on the future of cryptocurrency privacy, organized by crypto-supporting Commissioner Hester Peirce.

Chairman Paul Atkins said in his opening remarks that the agency is considering how to empower breakthrough privacy protocols while addressing "national security threats."

"Today's roundtable participants will explore a question that is fundamentally relevant to the United States: Can people participate in modern financial activities without giving up privacy? This contradiction raises some important questions. On one hand, the federal government has an obligation to protect the American people from threats to national security interests, including through measures such as the Bank Secrecy Act, which the Treasury and other agencies use to curb illicit financial activities."

"On the other hand, the ability to freely manage personal affairs, including financial matters, without surveillance from the government or others, is one of America's core values."

Atkins stated that regulators must resist the temptation to excessively obtain Americans' digital data.

With the advent of cryptocurrency, it is not hard to imagine a future where governments and a range of intermediaries could peer into every aspect of an individual's financial life. While regulators may have a strong appetite for data, this tendency is clearly—and fundamentally—incompatible with the kind of free society that makes America strong.

Therefore, as regulators embrace the opportunities brought by cryptocurrency, they must remain humble and principled. In the analog era, financial regulation was naturally constrained by paper records, geographical limitations, and manual processes. While these delays were inconvenient for the government, they also naturally limited the amount of information the Commission could obtain about any American investor. However, in the digital era, these constraints have been greatly reduced, which is why today's discussion on cryptocurrency and privacy-enhancing technologies is particularly important…

Atkins warned that cryptocurrency could be used to support extremely invasive surveillance.

"Public blockchains are more transparent than any traditional financial system. Every value transfer is recorded on a ledger that anyone can access. On-chain analytics companies have already excelled at helping law enforcement link on-chain activity to off-chain identities. In other words, if the development goes in the wrong direction, cryptocurrency could become the most powerful financial surveillance architecture ever."

In fact, if the government's instinct is to treat every wallet as 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 would turn this ecosystem into a financial panopticon.

Atkins stated that privacy protocols such as zero-knowledge proofs have the potential to verify the legitimacy of users and transactions without giving the government access to specific activity information.

"...This technology can provide privacy protection tools that were impossible in the analog era, such as zero-knowledge proofs, selective disclosure, and wallet designs that allow users to prove compliance without providing intermediaries or the government with complete financial records or personal information. We can envision a system where regulated platforms can prove their users have been screened without permanently retaining person-by-person records of every payment, transaction, or donation..."

I believe that as long as we work together, we can build a framework that ensures technological and financial progress does not come at the expense of individual freedom."

Generate image: Mid-journey