SEC’s Hester Peirce Warns Against Overregulating Decentralized Crypto

Speaking at the Science of Blockchain Conference in Washington D.C. on August 4, U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce delivered a strong defense of financial privacy and decentralized technologies, warning against overreaching regulation that could stifle innovation and individual freedoms.

Good to know

• Peirce criticized existing surveillance laws like the Bank Secrecy Act, calling them outdated and incompatible with decentralized systems.
• She called for protecting privacy tools such as zero-knowledge proofs and DeFi protocols.
• Peirce argued that financial privacy is a constitutional right, not a threat to law enforcement.

Peirce’s comments took direct aim at the growing trend of regulatory efforts seeking to force decentralized crypto platforms into roles more akin to traditional financial institutions. She warned that requiring developers or users in permissionless networks to collect data or report transactions risks undermining the very nature of what makes blockchain revolutionary.

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 in which the Fourth Amendment was crafted.

She emphasized that crypto’s open systems empower users to control their own financial activity without relying on centralized third parties that are legally obligated to surveil them.

A Critique of the Bank Secrecy Act

Peirce singled out the Bank Secrecy Act (BSA) for turning banks into surveillance arms of the government. She challenged proposals that seek to impose similar expectations on decentralized technologies, calling the idea not only impractical but incompatible with the structure of blockchain networks.

She argued that applying such laws to decentralized code or peer participants fundamentally changes how these technologies work—and violates the intent behind them.

Privacy as a Right, Not a Loophole

Peirce closed her speech with a call to preserve financial privacy as a basic right that can exist alongside efforts to maintain national security and combat crime. She said:

“Denying people financial privacy—whether through sweeping surveillance programs or restrictions on privacy-protecting technologies—undermines the fabric and freedoms of our families, communities, and nation.”

She urged policymakers to recognize privacy-preserving tools not as obstacles, but as critical infrastructure for digital freedom in the 21st century.

While regulators often cite money laundering concerns, Peirce emphasized that well-crafted laws can strike a balance—one that respects individual liberty while also protecting against abuse.