SEC Commissioner Hester Peirce told a crowd of blockchain researchers and practitioners that lawmakers and regulators must defend people’s right to transact privately.
She made the comments at the Science of Blockchain Conference while Roman Storm’s Tornado Cash trial moves toward a verdict. Peirce argued that privacy tools and self-custody of crypto deserve the same safeguards once granted to physical coins under the Fourth Amendment.
Tornado Cash Trial Looms
Peirce’s remarks come just as co-founder Roman Storm faces jury deliberations in New York. Tornado Cash is a crypto mixing service that masks the flow of funds.
Prosecutors say criminals used it to launder money. Storm’s team insists the software itself cannot be blamed for user actions. If convicted, he could face up to 40 years in prison.
Lessons from the 1990s
Peirce drew a parallel with past fights over strong cryptography. In the 1990s, the government tried to keep robust encryption out of private hands in the name of national security.
Developers like Phil Zimmermann pushed back with court challenges. That fight led to widespread acceptance of encryption for email, online shopping and banking. Peirce said today’s privacy-focused code deserves the same protection.
Open-Source Developers and Responsibility
The commissioner also warned against holding open-source creators liable for misuse of their code. She said developers of privacy software should not face prosecution when others abuse their tools.
An immutable protocol cannot be forced to adopt surveillance measures. Regulators must accept that a public, open-source system remains available for all time.
No Surveillance of Peer-to-Peer Trades
Peirce criticised proposals that would require businesses to track who their customers transact with. She noted that such rules would turn ordinary firms into government agents.
That approach would clash with the principle of a free society, she urged regulators to avoid forcing intermediaries into peer-to-peer transactions or enforcing blanket record-keeping.
Also Read: SEC Commissioner Hester Peirce Calls For Legal Clarity On Crypto Regulation
Broader Implications for DeFi
Her comments weigh decentralised finance, earlier drafts of the DeFi broker rule nearly imposed strict customer checks on smart contract platforms.
Peirce said that the internet thrived because permissionless technologies were not over-regulated. She argued that privacy tools, though they can aid wrongdoing, drive innovation and personal freedom.
Balance Between Security and Liberty
Peirce’s speech highlighted the trade-off between national security and individual rights. She acknowledged that unwanted uses of privacy technology exist.
Yet she insisted that rolling back basic liberties would do more harm than good. In her view, robust privacy underpins trust in online markets and financial systems.
Industry Response
The crypto community reacted swiftly. Many developers thanked Peirce for defending open-source work. Civil liberties groups praised her stance on self-custody and encryption. Some lawmakers signalled interest in crafting clearer rules that protect both privacy and security.
As the Tornado Cash trial verdict nears, regulators will weigh Peirce’s words against enforcement goals. If Storm is convicted, it could set a precedent for prosecuting code authors.
Also Read: Pro-Crypto Hester Peirce May Not Get SEC Top Job, But Could Lead “Crypto Task Force”