Government Ought to Safeguard Cryptocurrency Privacy Rather Than Limit It (According to SEC's Peirce)
In a speech titled "Financial Privacy in the Digital Age," Hester Peirce, also known as "Crypto Mom," made a strong case for protecting Americans' right to financial privacy and self-custody of crypto assets. The speech was delivered at the Science of Blockchain Conference on Monday.
Peirce, a pro-crypto commissioner at the SEC, criticized financial surveillance and the banking system, stating that the 55-year-old Bank Secrecy Act (BSA) has "deputized American financial institutions as de facto law enforcement investigators." She highlighted the need for modernizing financial privacy regulations to reflect the digital and crypto era's realities.
Peirce's policy recommendations include protecting the right to financial privacy, modernizing financial privacy regulations, supporting disintermediation through blockchain technology, upholding the core American value of self-custody, expanding and adapting custody regulations, and promoting regulatory frameworks that provide efficient licensing structures.
The commissioner used a "peanut butter and watermelon" anecdote to illustrate the value of disintermediation in finances. She argued that DeFi protocols, which allow everyone to borrow on the same, publicly transparent terms, replacing a bank that might not want to lend to certain types of people, offer a more equitable and transparent financial system.
Privacy-protecting crypto technologies such as zero-knowledge proofs, mixers, and privacy pools can reduce reliance on intermediaries, Peirce stated. These technologies enable private, autonomous financial activities without exposing personal data to multiple parties.
In addition, the SEC's 'Project Crypto' supports the development of tokenized assets and emerging financial models. The initiative aims to review and potentially repeal outdated rules that are no longer applicable to the crypto sector.
Meanwhile, the White House is preparing an executive order that will punish banks that block crypto investors and companies. The details of the executive order regarding banks and crypto investors/companies were not specified in the article.
The SEC's Consolidated Audit Trail (CAT) tracks every investor's trading activity without suspicion of wrongdoing. In 2024, 324,000 financial institutions filed over 25 million transaction reports, including 4.7 million "Suspicious Activity Reports." However, Peirce raised concerns about the government's access to financial data without warrants due to the third-party doctrine.
Peirce's comprehensive approach to balancing investor protection, innovation, and the protection of financial privacy rights in the digital age is a significant step towards ensuring a free and fair financial system for all Americans.
- Hester Peirce, also known as "Crypto Mom," advocates for protecting Americans' right to financial privacy and self-custody of crypto assets, suggesting modernizing financial privacy regulations to reflect the digital and crypto era's realities.
- In her policy recommendations, Peirce encourages supporting disintermediation through blockchain technology, upholding the core American value of self-custody, and promoting regulatory frameworks that provide efficient licensing structures.
- Peirce argues that DeFi protocols, privacy-protecting crypto technologies such as zero-knowledge proofs, mixers, and privacy pools, can offer a more equitable and transparent financial system by reducing reliance on intermediaries and protecting privacy.
- The White House is preparing an executive order to punish banks that block crypto investors and companies, while the SEC's Consolidated Audit Trail (CAT) tracks investors' trading activities, raising concerns about government access to financial data without warrants due to the third-party doctrine.
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