Hester Peirce, the departing commissioner of the U.S. Securities and Exchange Commission, argued that regulators should pivot toward technologies that safeguard user privacy while still tackling illicit activity.
Privacy over Surveillance
Speaking at the SIFMA Digital Assets Conference in New York, Peirce described the current regulatory trajectory as a “panopticon” where more personal information is collected and stored. She contrasted this with a vision that employs emerging cryptographic solutions to achieve compliance with far less data exposure.
Tools She Highlighted
Peirce singled out zero-knowledge proofs and attribute-based credentials as examples of how a party can verify attributes such as age, accredited-investor status, or exclusion from sanctions lists without disclosing the underlying personal details. These methods, she said, allow regulators to confirm compliance without building massive databases that could be vulnerable to breaches.
Reducing Redundant KYC
Another pillar of her proposal is to let firms rely on identity verification already performed by other regulated entities. Rather than each company gathering and retaining the same sensitive information, a shared-verification model could streamline compliance and limit data proliferation.
Regulatory Context
Peirce, who will leave the SEC in November, was appointed to lead the agency’s Crypto Task Force in 2025 and has been noted for a more cooperative stance toward the industry during the current administration. This contrasts with the agency’s recent aggressive enforcement actions under Chairman Gary Gensler, who has pursued numerous lawsuits against crypto platforms for alleged securities violations. The commission’s broader effort to craft clear rules for digital assets continues despite the recent blockage of the Clarity Act.
Why it matters
If adopted, Peirce’s recommendations could reshape how the United States balances privacy and security in the rapidly evolving crypto market. Embracing privacy-preserving cryptography may reduce the risk of data leaks and foster greater user confidence, while still giving regulators the tools needed to identify illicit behavior. Moreover, a shared-verification framework could lower compliance costs for startups and established firms alike, potentially accelerating innovation in the sector.
