SEC Chair Roundtable Speech: Balancing Crypto Privacy and Financial Regulation

Source: SEC official website; Translation: Golden Finance

The Chairman of the U.S. Securities and Exchange Commission (SEC), Paul S. Atkins, delivered a speech at the SEC Cryptocurrency Working Group roundtable on financial monitoring and privacy on December 15th, local time. He stated that blockchain has strong capabilities in related-party transactions and sender identification; if regulatory directions are misaligned, the crypto ecosystem could be pushed toward “the most powerful financial surveillance architecture in history.”

Paul S. Atkins warned that if the government treats “every wallet as a broker, every code as an exchange, and every transaction as reportable,” it will turn the industry into a “financial panorama prison.” However, he also emphasized that there remains a feasible path that balances security and innovation without sacrificing personal privacy. Discussions around the boundaries of blockchain privacy and regulation are becoming central regulatory issues.

Below is the full transcript of Paul S. Atkins’s speech:

Ladies and gentlemen, good afternoon. Thank you all for being here. First, I want to thank Commissioner Hester Peirce and the entire Cryptocurrency Working Group for organizing today’s roundtable. I also want to thank the distinguished panel members who have tirelessly come to Washington to share their insights on 21st-century financial privacy issues. Before I share my own views, I must reiterate that the opinions I express today are solely my own and do not necessarily represent the SEC or other commissioners’ positions.

Today’s roundtable participants will explore a fundamentally American issue: whether people can participate in modern financial activities without sacrificing privacy. This contradiction raises many important questions. On one hand, the federal government has an obligation to protect American citizens from threats to national security, including through measures like the Bank Secrecy Act to curb illegal financial activities, which are actions taken by the Treasury Department and other agencies. On the other hand, citizens have the right to handle personal affairs—including financial matters—freely and without government or other institutions’ surveillance, which is a core American value.

The emergence of cryptocurrencies has played a catalytic role, providing a unique opportunity for us to reconsider this issue in the context of 21st-century technology. Since January of this year, the current administration has emphasized returning power to the American people, enabling them to manage their own affairs, including in the realm of cryptocurrencies.

From our perspective, the SEC must confront its achievements in balancing investor protection and privacy. The Commission has established tools such as the Consolidated Audit Trail (CAT), swap data repositories, and Form PF, claiming these are vital for protecting investors, combating fraud, and maintaining market security. However, the federal government’s relentless data appetite has led to the expansion of these tools, increasingly threatening the freedom of American investors and imposing often ineffective costs, as the government has not even utilized all the information submitted. For example, although the original intent of creating CAT was to better understand trading activity across markets, it has evolved into a powerful system that brings the SEC closer to large-scale surveillance. As a result, we have taken steps to reduce some of the most sensitive data elements in CAT and to reassess its scope and costs.

Friedrich von Hayek, in his work The Fatal Conceit, criticized the belief held by many government officials: that the solution to problems is to gather enough smart people in one room and collect enough information so that these all-knowing individuals can find a perfect solution based on all that data. But we have seen how poorly this approach works in practice—or perhaps it simply doesn’t work at all. So, Dr. Hayek’s point is more relevant than ever!

With the advent of cryptocurrencies, it’s easy to imagine that in the future, governments and a series of intermediaries could almost peer into every aspect of individual financial lives. Regulators may have a strong desire for data, but this tendency is clearly at odds with the very essence of the free society that has made America great.

Therefore, regulators must remain humble and principled as they embrace the opportunities brought by cryptocurrencies. In the analog era, financial regulation was naturally limited by paper records, physical distance, and manual processes. While these delays caused inconvenience to the government, they also naturally limited the amount of information the SEC could obtain about any American investor. But in the digital age, these limitations have been significantly reduced, making discussions about cryptocurrencies and privacy-enhancing technologies especially important today.

Public blockchains are more transparent than any traditional financial system ever was. Every value transfer is recorded on a ledger accessible to anyone. On-chain analysis firms have excelled at helping law enforcement link on-chain activity with off-chain identities. In other words, if regulatory directions are wrong, cryptocurrencies could become the most powerful financial surveillance architecture in history.

In fact, if the government treats every wallet as a broker, every software as an exchange, every transaction as a reportable event, and every protocol as a monitoring node, it will turn this ecosystem into a financial panorama prison.

Meanwhile, this technology also provides privacy tools that the physical world cannot offer, such as zero-knowledge proofs, selective disclosure, and wallet designs that allow users to prove compliance without providing complete financial records or personal details to intermediaries or the government. We can envision a system where regulated platforms can demonstrate that their users have passed screening without permanently storing detailed records of every payment, transaction, or donation.

These tools will also help our markets continue to operate smoothly as they migrate onto the blockchain. The inherent transparency of public blockchains could suppress important financial market activities.

For example, many institutions rely on the ability to establish positions, test strategies, and provide liquidity without immediately exposing these activities to competitors and predatory traders. If every order, hedge, and portfolio adjustment were visible in real time, phenomena like front-running, mimicry, and “fomo selling” could occur, making it harder for companies to manage risk. If every inventory imbalance or client fund movement were instantly exposed to the market, the appeal of market-making and underwriting would be greatly diminished.

This technology makes it possible for the government to balance its interests in countering national security threats with the privacy interests of the American public. But to better achieve this balance, we must ensure that Americans are not immediately suspected when they use these tools. Protecting citizens’ legitimate activities from mass surveillance while enabling the government to fulfill its vital functions is the best way to safeguard national security and fundamental civil liberties, while also fostering space for innovation.

Therefore, this is a matter of great importance—the issues before us are profound and will have lasting impacts. At the start of this roundtable, I look forward to hearing your expert insights on how the committee can better protect Americans’ privacy and how privacy tools in cryptocurrencies can reduce rather than increase the need for large-scale financial surveillance.

I firmly believe that, through collaboration, we can build a framework that ensures technological progress and financial development do not come at the expense of personal freedom.

Unfortunately, due to other commitments, I cannot participate fully in the proceedings, but I am pleased to be here today and look forward to engaging with all of you. Thank you for taking the time to attend. I look forward to an exciting discussion ahead.