Hester Peirce’s Address at the Science of Blockchain Conference
In a compelling address at the Science of Blockchain Conference on Monday, Hester Peirce, a Commissioner with the U.S. Securities and Exchange Commission (SEC), underscored the importance of safeguarding individuals’ rights to engage in private transactions. This statement comes just as the trial of Roman Storm, who co-founded the cryptocurrency mixing service Tornado Cash, approaches its conclusion.
Defending Privacy and Self-Custody
Peirce emphasized that privacy-enhancing technologies and the freedom to self-custody cryptocurrencies must be defended, highlighting that developers of open-source privacy solutions should not be held liable for the misuse of their creations by others.
“It is crucial to ensure that people can not only communicate privately but also transfer assets without prying eyes, reminiscent of how physical coins were exchanged when the Fourth Amendment was established,”
she stated.
Challenges of Financial Surveillance
As jury deliberations continue in Storm’s trial, where he faces accusations that his service was exploited for money laundering, Peirce pointed out the futility of imposing financial surveillance on immutable, open-source protocols, as these tools are forever accessible to users.
Historical Context of Cryptography
Reflecting on historical context, Peirce recalled that in the 1990s, there was significant governmental resistance to the idea of allowing strong cryptography to be accessible to the public, a stance that changed largely due to advocacy from cryptographers like Phil Zimmermann, the creator of PGP encryption.
“The successful pushback from cryptographers was instrumental in the evolution of the internet, which relies heavily on encryption for secure communication, online banking, and commerce,”
she explained.
Opposition to Regulatory Measures
Furthermore, Peirce took a stance against proposed regulatory measures reminiscent of the now-defunct decentralized finance (DeFi) broker rule, which aimed to compel businesses to monitor and log transaction records involving customers. She argued that such regulations would effectively turn businesses into surveillance agents in a manner that contradicts the principles of a free society.
Implications of the Trial
Peirce’s remarks come in light of a controversial DeFi broker rule established during the Biden administration, which sought to impose comprehensive reporting requirements on DeFi platforms regarding their users, ultimately leading to fears of stifled innovation in the blockchain space.
As for the trial, Storm’s defense posits that Tornado Cash functions as a legitimate tool, analogous to any other technology, and that developers should not bear responsibility for how their software is used. The case adds to a growing list of legal challenges facing creators of crypto-mixing services, a concern marked recently by the guilty plea of the co-founders of another mixing tool, Samourai Wallet. If convicted, Storm faces a potential sentence of up to 40 years in prison, highlighting the significant legal implications surrounding privacy-focused technologies in the cryptocurrency sector.
