SEC Paul Atkins Says Government Must Limit Crypto Surveillance Capabilities

TLDR

• SEC Chairman Paul Atkins warned that crypto technology could become the most powerful financial surveillance tool ever created if not properly regulated
• The SEC held its sixth crypto roundtable on Monday, focusing on privacy and surveillance issues in digital assets
• Atkins argued government policies should limit bulk surveillance of lawful financial transactions while still protecting against illicit finance
• SEC Commissioner Hester Peirce stated that protecting privacy should be the norm and not an indicator of criminal intent
• The discussion comes as the Trump administration withdraws from cases against privacy tools like Tornado Cash, whose creator Roman Storm was convicted in August

SEC Chairman Paul Atkins issued a warning Monday about the potential for cryptocurrency technology to enable unprecedented government surveillance of citizens’ financial activities. Speaking at the agency’s sixth crypto-related roundtable, Atkins emphasized the need for formal policies to prevent abuse of the transparent nature of blockchain technology.

The roundtable focused specifically on privacy and surveillance issues within the digital asset sector. Atkins cautioned that without proper guardrails, blockchain’s ability to link transactions to individual users could be exploited for mass monitoring.

The chairman pointed to existing surveillance tools that have raised privacy concerns. He mentioned the consolidated audit trail technology used to monitor U.S. markets and post-2008 financial crisis reporting requirements. Atkins suggested these tools have expanded beyond their original scope.

Privacy Protection Standards

Despite his warnings, Atkins expressed confidence that a balance between innovation and privacy protection is achievable. He stated that the crypto industry is capable of designing systems that screen for illicit finance while preserving user privacy.

SEC Commissioner Hester Peirce echoed these concerns during the roundtable. She leads the agency’s crypto task force and argued that privacy protection should be considered normal rather than suspicious. Peirce said the government should avoid imposing Bank Secrecy Act obligations on software developers who don’t have custody of user assets.

The privacy debate has intersected with recent criminal cases. In August, Tornado Cash creator Roman Storm was found guilty on money transmitting charges. Tornado Cash is a decentralized mixing service designed to provide transaction privacy for users.

Regulatory Shift Under Trump

The Trump administration has signaled a different approach to crypto regulation. Acting Assistant Attorney General Matthew Galeotti stated in August that writing code is not a crime. This represents a shift from previous enforcement actions against privacy tool developers.

Atkins has emphasized close coordination with the Commodity Futures Trading Commission on crypto oversight. His approach differs from former SEC Chairman Gary Gensler, as Atkins argues most digital assets are not securities and fall outside the SEC’s jurisdiction.

The SEC’s Project Crypto initiative is moving forward on several fronts. These include defining crypto securities, establishing tokenization standards, and creating an innovation exemption for testing new products. The agency plans to propose new rules for regulating its portion of the digital asset industry.

Peirce referenced the Fourth Amendment in her remarks, which protects against unreasonable government searches. She called on the government to guard people’s right to live private lives. The debate over financial privacy continues as traditional finance companies enter the crypto space.

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