SEC Commissioner Backs Crypto Privacy Amid Tornado Cash Trial

US Securities and Exchange Commission (SEC) Commissioner Hester Peirce has reiterated her support for crypto privacy and open-source development, emphasizing that developers should not be held accountable for the end-use of their code. Speaking at the Science of Blockchain Conference on August 4, Peirce criticized growing regulatory pressure on decentralized technologies and warned that targeting software developers undermines the principles of privacy, innovation, and neutrality in code design [1].

Peirce’s remarks highlight the broader tension between privacy and regulation in the crypto space, particularly in the wake of the legal case against Roman Storm, co-founder of Tornado Cash. Storm is facing charges of conspiracy to commit money laundering, violations of US sanctions, and operating an unlicensed money-transmitting business. The defense argues that Tornado Cash is a non-custodial, autonomous protocol, and developers do not have control over how users interact with it [1]. Peirce has long supported this perspective, advocating for the right of individuals to transact privately and for developers to operate without undue legal exposure.

In her speech, Peirce drew parallels to the 1990s battle over strong encryption, where developers like Phil Zimmermann fought to protect private cryptography from government overreach. She argued that similar principles should apply to privacy-preserving crypto tools, which she described as essential public goods. Peirce warned that mandating surveillance of open-source infrastructure is “fruitless,” as once deployed, such protocols are immutable and globally accessible [1]. She further emphasized that denying people financial privacy, whether through surveillance programs or restrictions on privacy-protecting technologies, threatens the freedoms of families, communities, and the nation.

Peirce also criticized the DeFi broker rule, a proposed regulation under the Biden administration that would have required decentralized finance protocols to report user data to the IRS. She described such a mandate as an overreach that would turn businesses into surveillance agents, violating the core principles of decentralized finance and peer-to-peer transactions. She argued that regulators should not compel businesses to track their customers’ activity and that lawmakers should respect the original vision of decentralized protocols as open, neutral infrastructure [3].

The debate over privacy tools like Tornado Cash has become a focal point in the regulatory landscape. Peirce supports the view that these tools are dual-use technologies—capable of both legitimate and illicit uses—but that their benefits outweigh the risks when appropriate safeguards are in place. She stressed that privacy-preserving technologies should remain available for all to use, even when some individuals may exploit them for illegal purposes. The outcome of Storm’s trial could set a significant legal precedent, determining whether developers of such tools face increased liability under U.S. law [1].

Peirce’s stance reflects a broader philosophical divide within the regulatory community. While some advocate for stricter oversight to prevent criminal activity, Peirce has consistently called for balanced approaches that protect user rights and foster innovation. Her position underscores the importance of thoughtful regulation that respects the potential and limitations of emerging technologies [1].

Source: [1] Hester Peirce Defends Crypto Privacy Amid Tornado Cash ... (https://cointelegraph.com/news/hester-peirce-defends-crypto-privacy-tornado-cash-trial)

[2] SEC Commissioner Peirce defends transaction privacy ... (https://www.panewslab.com/en/articles/0d3020f3-f0d6-4624-ba35-b41038eaf6ca)

[3] VELOUSD - SEC's Peirce defends transaction privacy as ... (https://mx.advfn.com/bolsa-de-valores/COIN/VELOUSD/crypto-news/96561191/sec-s-peirce-defends-transaction-privacy-as-torna)