U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce has issued a strong defense for financial privacy and open-source development, calling on lawmakers and regulators to protect individuals’ right to transact privately—particularly in the age of blockchain and decentralized finance (DeFi).
Speaking at Monday’s Science of Blockchain Conference, Peirce said privacy-preserving tools and the right to self-custody digital assets must be safeguarded. She emphasized that developers of open-source privacy software should not be held liable for how others use their code.
“We should take concrete steps to protect people’s ability not only to communicate privately, but to transfer value privately, as they could have done with physical coins in the days when the Fourth Amendment was crafted,” said Peirce.
She further argued that requiring immutable, open-source protocols to comply with financial surveillance measures is “fruitless” since anyone can use such code forever without restriction.
Tornado Cash trial debates developer liability
Peirce’s remarks come as Roman Storm, co-founder of crypto mixing service Tornado Cash, awaits a verdict in the Southern District of New York.
Storm is accused of enabling money laundering through the service, though his defense team maintains that the tool is neutral and not inherently illegal.
The Commissioner compared the case to the 1990s battle over cryptography, when engineers like Phil Zimmermann fought for strong encryption for everyone. She points out that these early victories were crucial to the success of the internet, but reminds us that they still inform our modern fight for privacy rights.
SEC Commissioner warns against undermining civil liberties
Peirce also criticized the now-defunct DeFi broker rule, which would have required decentralized platforms to collect and report user data to the IRS. “Doing so would deputize us to surveil our neighbors—a practice antithetical to a free society,” she said.
Like the internet, she maintained that blockchain-based technologies with legitimate uses must remain openly accessible—even if some bad actors misuse them—because restricting them risks infringing on fundamental freedoms.
The Tornado Cash trial may establish a crucial legal precedent for courts’ interpretation of developer liability in the crypto space.
In a related case, Samourai Wallet co-founders Keonne Rodriguez and William Lonergan Hill have indicated their intention to plead guilty to charges linked to their crypto mixing service.
Documents filed in a New York federal court on Thursday indicated that Rodriguez and Hill both intend to enter guilty pleas on Wednesday morning. In April 2024, the two had entered their original not guilty plea in connection with allegations they operated an unlicensed money transmitting business that processed over $2 billion of illegal financial transactions— some linked to darknet marketplaces like Silk Road.
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