SEC Commissioner Hester Peirce Says Blockchain and ZK Proofs Can Protect Privacy

SEC Commissioner Hester Peirce discusses blockchain and zero-knowledge proofs as tools

SEC Commissioner Hester Peirce said new technologies including blockchain and zero-knowledge proofs could allow Americans to strengthen both security and privacy while improving efforts to detect illegal activity, according to information shared by CoinMarketCap.

Peirce made the remarks during the SIFMA Digital Assets Conference on Sept. 23, where she discussed financial surveillance and the potential role of cryptographic technologies in reducing unnecessary collection of personal information. She said Americans deserve “both security and privacy” and argued that technology can help achieve both objectives.

Peirce Challenges Data-Heavy Financial Surveillance

Peirce's remarks focused on the amount of personal and financial information collected through existing regulatory frameworks. She questioned whether continuously expanding data collection is the most effective way to identify illicit activity.

She specifically pointed to know-your-customer and anti-money-laundering requirements, under which financial institutions collect and monitor customer information and report certain transactions or activity to authorities. Peirce argued that building increasingly large stores of financial data can create additional privacy and security concerns without necessarily making enforcement more effective.

Her comments were presented as her own views as an SEC commissioner and not necessarily those of the agency or its other commissioners.

Zero-Knowledge Proofs Offer Alternative to Full Data Disclosure

A central part of Peirce's argument was the use of cryptographic tools that can verify information without requiring disclosure of the underlying personal data.

Zero-knowledge proofs allow one party to demonstrate that a particular statement is true without revealing the information used to establish that statement. In her remarks, Peirce cited examples such as proving eligibility based on age, citizenship, accredited-investor status or sanctions screening without necessarily disclosing a person's name, income or address.

She also discussed attribute-based credentials, which could verify specific characteristics about an individual while limiting exposure of the underlying information.

The approach would shift some financial compliance processes from collecting complete personal records toward verifying only the facts required for a particular transaction or service.

Blockchain Transparency and Privacy

Peirce also highlighted a potential role for public blockchain networks in financial oversight. She said public ledgers can provide permanent, public and auditable records of transactions, while cryptographic tools can establish facts without exposing all of the underlying information.

That combination, in her view, could allow authorities to analyze transaction activity using blockchain-forensics tools while reducing the amount of personal information that financial institutions and governments need to collect.

The remarks do not represent a new SEC rule or formal regulatory requirement. Instead, they outline Peirce's position on how regulators could approach financial surveillance as cryptographic technologies become more capable.

Peirce Calls for Changes to Regulatory Framework

Peirce said the government and regulated institutions may need to adjust their methods as technologies enable financial activity to operate with fewer intermediaries. She called for greater use of attribute-based verification where technically feasible and questioned whether multiple institutions need to independently collect the same sensitive customer information.

Her comments come as the SEC continues work on digital-asset regulation through its Crypto Task Force, which is led by Peirce. The task force is currently engaging with industry participants and other stakeholders on regulatory issues involving digital assets.

Peirce concluded that the policy challenge is not simply whether to use new markets technologies, but how to apply them in ways that protect personal information while allowing authorities to identify illegal conduct.

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.