- SEC Chair Paul Atkins warns heavy crypto rules could turn blockchains into broad financial surveillance systems.
- Atkins says smart regulation can protect national security while still supporting innovation and user privacy.
- Regulators face pressure to update crypto rules as adoption grows and privacy concerns gain urgency.
SEC Chair Paul Atkins warned that aggressive crypto regulation could turn blockchain networks into powerful surveillance systems. He said policy choices will determine whether crypto supports privacy or expands financial monitoring.
Atkins spoke Monday during a crypto roundtable hosted by the SEC Crypto Task Force in Washington.
Atkins Flags Surveillance Risks From Overregulation
Atkins explained that blockchain technology already links transactions closely to user activity. Therefore, regulatory design will shape how much personal financial data becomes traceable. He cautioned that treating every wallet as a broker could widen reporting obligations. As a result, routine transactions could face constant oversight.
He also noted that blockchains operate differently from traditional financial systems. Applying legacy rules could unintentionally expand government visibility into lawful activity. Atkins stressed that overregulation risks transforming open networks into permanent monitoring tools. He said that outcome would raise serious civil liberty concerns.
Simultaneously, Atkins did not deny the value of national security measures. He pointed out that regulation must handle illegal finance and not innovation. The SEC chairman indicated that regulators could continue to achieve that balance.
Path Forward Balances Security and Privacy
Atkins stated that policymakers can protect users while allowing technological progress. He said thoughtful frameworks could limit misuse without imposing blanket surveillance. Regulators discussed tailoring oversight based on risk rather than structure. That approach could reduce unnecessary data collection.
Officials also examined how software developers fit into regulatory models. Overbroad definitions could pull neutral tools into compliance regimes. Atkins suggested regulators avoid assigning liability based solely on technology design. He emphasized intent and behavior should matter.
The discussion reflected growing concern inside the agency. Regulators acknowledged that crypto adoption continues to rise across financial markets. As a result, surveillance effects could scale quickly if rules remain unchecked.
Support From Fellow Commissioners
SEC Commissioner Hester Peirce supported Atkins’ position on privacy. She argued that privacy should remain a normal feature of financial life. Peirce warned against assuming private transactions signal criminal intent. She said regulators should avoid forcing intermediaries into decentralized systems.
Peirce leads the SEC Crypto Task Force, which organized the roundtable. This marked the sixth session since January. Previous meetings focused on custody, trading, and compliance. In March, the SEC Crypto Task Force held a roundtable to discuss digital asset rules and security classifications. This session centered on surveillance and user privacy.
Commissioner Mark Uyeda also joined the discussion. Authorities emphasized the necessity to have revised regulations that are decentralized. The representatives of Zcash, the Blockchain Association, and the Crypto Council of Innovation took part.
Legal and Legislative Pressure Builds
The debate occurs amid heightened legal scrutiny of privacy tools. In August, a jury convicted Tornado Cash developer Roman Storm on a money transmitting charge. He faced charges including laundering $1 billion and violating U.S. sanctions. The case drew attention because the platform used decentralized software.
After the verdict, advocacy groups pushed for an appeal. That effort gained momentum as Justice Department guidance shifted. Officials clarified that writing code alone does not constitute a crime. However, uncertainty remains around enforcement boundaries.
Meanwhile, lawmakers face limited time to pass crypto legislation before 2026. Sources said early drafts could expand authority for the Commodity Futures Trading Commission. Those drafts could also narrow the SEC’s role. Lawmakers continue negotiating the CLARITY Act, which passed the House in July.
