SEC Commissioner Hester Peirce Calls for End to Mass KYC Data Collection

SEC Commissioner Hester Peirce calls for reduced KYC data collection and promotes zero-

SEC Commissioner Hester Peirce has called for a shift away from broad collection of personal information under know-your-customer (KYC) and anti-money laundering (AML) frameworks, arguing that cryptographic tools can verify compliance without requiring institutions to retain sensitive user data.

Coin Bureau highlighted Peirce’s position in a post on X, citing her concerns that existing KYC and AML systems create large databases containing sensitive information. Peirce has argued that concentrating such data can expose users to risks including hacking, phishing and physical attacks.

Peirce Questions the Data-Collection Model

Speaking at the SIFMA Digital Assets Conference in New York on Sept. 23, Peirce criticized the continued expansion of financial data collection. She described the current approach as building increasingly large “data haystacks” in the expectation that authorities will be able to identify illicit activity within them.

Under existing KYC and AML processes, financial institutions can be required to collect and verify information such as customers’ names, birthdays, addresses and identification numbers. Institutions also have ongoing obligations to monitor customer relationships and activities and, when applicable, file Currency Transaction Reports and Suspicious Activity Reports.

Peirce questioned whether all of that underlying information needs to be collected when a regulator or financial institution may only need to establish a particular fact about a customer.

Her comments were presented as her own views rather than an official position adopted by the U.S. Securities and Exchange Commission.

Zero-Knowledge Proofs as an Alternative

Peirce pointed to zero-knowledge proofs and attribute-based credentials as technologies that could allow financial institutions to verify specific eligibility requirements without obtaining the underlying personal information.

For example, attribute-based credentials could establish facts such as a person's age, citizenship, accredited-investor status or absence from sanctions lists without revealing the underlying data. A zero-knowledge proof can similarly demonstrate that an individual satisfies a particular requirement without disclosing information such as their name, income or address.

The approach would not eliminate compliance requirements. Instead, Peirce argued that regulators should move toward verifying attributes where technologically feasible rather than relying on prescriptive requirements to collect and store broad categories of personal information.

Regulatory Framework Remains a Key Issue

Peirce said the necessary technologies already exist, but their broader use depends on regulatory rules that permit and encourage privacy-preserving verification.

She called for regulators to reconsider whether each piece of information currently required under financial rules is necessary, or whether institutions only need confirmation of a specific fact that the information is intended to establish. She also questioned whether the same information needs to be collected by multiple firms.

The proposal therefore focuses on changing the method of compliance rather than removing the underlying objective of identifying customers and detecting illicit financial activity.

For now, Peirce’s remarks do not themselves markets change existing KYC or AML requirements. The immediate issue is whether regulators will create a framework that allows attribute-based verification and zero-knowledge technologies to be used more broadly in financial compliance.

Writer: Victoria Hale
Technology & Blockchain Writer

Victoria Hale writes about blockchain technology, digital infrastructure, and the intersection of emerging technologies with finance. Her articles explore how new protocols and systems are shaping the evolving digital economy.

She prioritises clarity and accuracy when explaining technical developments to a general audience.