Hester Peirce, commissioner of the US Securities and Exchange Commission (SEC), states unequivocally that the right to transact privately in crypto must be protected, just days before the verdict in the trial of Roman Storm, co-founder of Tornado Cash.
Why is the SEC taking a stance on crypto privacy?
On the sidelines of the Science of Blockchain Conference on June 10, 2024, Peirce stated that regulators and legislators must “take concrete steps to protect the ability of people not only to communicate privately, but to transfer value privately.”
The theme arises from the clamor for the trial of Roman Storm: the Tornado Cash service allows hiding the sender and recipient in blockchain transactions, becoming a symbol of the challenge between innovation and the fight against illegality.
What does the SEC’s stance on privacy in crypto entail?
Peirce warns:
“A centralized interface or a DAO can impose limits, but an open-source and immutable protocol remains accessible to everyone, forever. Expecting it to comply with anti-money laundering regulations is therefore pointless.”
The central point concerns the responsibility of open-source software developers: “We should not hold developers accountable if third parties use their code for illicit purposes.” According to Peirce, protecting the right to self-custody and financial privacy is comparable to the freedom to use cash, as guaranteed by the spirit of the Fourth Amendment.
The Tornado Cash case: developers at risk of imprisonment?
Roman Storm faces up to 40 years in prison if convicted, according to the charges of aiding in money laundering through Tornado Cash by malicious actors. The trial involves the direct or indirect responsibility of developers of cryptographic tools.
The Samourai Wallet team is also under investigation for similar reasons: they have decided to plead guilty after unsuccessfully attempting to have the charges dropped.
According to the defense, Tornado Cash is like “any other neutral tool”: it can be used by honest citizens or criminals, but those who create open-source cannot be held responsible for the abuses of others.
The lesson of the ’90s: digital privacy, history, and risks
Peirce recalls the battle of the ’90s, when governments wanted to exclude strong encryption from private devices. Thanks to figures like Phil Zimmermann (creator of PGP), the restrictions were overturned after long legal battles and public opinion debates.
That victory allows us today to use cryptography every day: for e-mail, online shopping, secure communications. According to Peirce, stopping privacy technologies means “slowing down or stifling innovation,” hindering the growth of the entire blockchain sector.
DeFi broker rule: surveillance risk and what would have changed
Until April 10, the DeFi broker rule desired by the previous administration would have required every decentralized protocol to collect and send to the tax authorities (IRS) detailed information on every transaction, including data on taxpayers and movements in crypto.
Peirce criticizes this perspective: “Forcing everyone to track operations is equivalent to deputizing us to surveil our neighbors, an approach contrary to a free society.” Therefore, leaving useful technologies available to everyone, even if they can be exploited by criminals, remains healthier than the alternatives.
The rule, then canceled by the current president on April 10, would have blocked Innovation, privacy, and development of DeFi made in USA.
What are the dangers and new frontiers now?
The clash between regulators and developers intensifies: the future of crypto privacy in the USA will depend on the outcome of these processes and the ability to balance the fight against crime with fundamental technological freedoms.
Those who create solutions like mixing service and private wallet risk long investigations and trials today. However, the position of Hester Peirce – and the lessons of the past – suggest that an advanced society cannot give up on privacy technologies.
Conclusions: what future for privacy and crypto in the United States?
The intervention of the SEC marks a clear stance: defending the privacy and autonomy of crypto developers is a priority to avoid stifling innovation. The process against Storm and initiatives against software like Tornado Cash will be decisive in outlining the new limits of digital freedom.
The future still depends on public opinion, legal cases, and the courage of legislators. Follow the community on Twitter for continuous updates and prepare your strategies, because the rules of blockchain privacy could change at any moment.