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Source:SEC official website;Compiled by: Bitchain Vision
U.S. Securities and Exchange Commission (SEC) Chairman Paul S. Atkins delivered a speech at the SEC Cryptocurrency Working Group’s roundtable on financial surveillance and privacy on December 15, local time.He said,Blockchain has a strong ability to correlate transactions and senders. If the regulatory direction is inappropriate, the encryption ecosystem may be pushed into “the most powerful financial surveillance architecture in history.”
Paul S. Atkins warned,If the government treats “every wallet as a broker, every piece of code as an exchange, and every transaction is required to be reported,” it will turn the industry into a “financial panopticon.”However, he also emphasized thatThere is a feasible path that combines security and innovation without sacrificing personal privacy.Discussions around the boundaries of blockchain privacy and regulation are becoming a core regulatory issue.
The following is the full text of Paul S. Atkins’ speech:
Ladies and gentlemen, good afternoon, thank you all for coming.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 panelists who took the trouble to come to Washington to share their insights on financial privacy issues in the 21st century.Before I elaborate on my own views, I must reiterate that the views I express here today represent only my own personal views and do not necessarily represent the positions of the SEC or other commissioners.
Participants in today’s roundtable will explore an inherently American question:Can people participate in modern financial activities without sacrificing privacy?.This contradiction raises many important questions.On the one hand, the federal government has an obligation to protect U.S. citizens from national security interests and threats, including through measures such as the Bank Secrecy Act, which is used by the Treasury Department and other agencies to curb illicit financial activity.On the other hand, the ability of citizens to conduct their personal affairs (including financial matters) freely without surveillance by the government and other agencies is one of the core values of the United States.
The emergence of cryptocurrencies has been a catalyst and provides us with a unique opportunity to think about this issue in the context of 21st century technology.Since January this year, the current administration has emphasized returning power to the American people so that they can handle their own affairs independently, including when it comes to cryptocurrency.
For our part, the SEC must reckon with its achievements in balancing investor protection and privacy.The committee established tools such as the Comprehensive Audit Trail (CAT), swaps data repository and Form PF, which it claimed were critical to protecting investors, combating fraud and maintaining market security.Yet the federal government’s insatiable thirst for data has led to the expansion of these tools, increasingly endangering the freedoms of American investors and subjecting them to costs that often yield little results because the government does not even use all the information submitted.For example, while the Commission’s original intention when creating CAT was to gain a clearer picture of trading in various markets, it eventually evolved into a powerful system that brought the SEC one step closer to mass surveillance.Because of this, we have taken steps to reduce some of the most sensitive data elements in CAT and revisit their scope and cost.
In his book The Fatal Conceit, Friedrich von Hayek attacked the belief among many government officials that the solution to a problem is to get enough smart people in a room and then gather enough information so that these know-it-alls can find a perfect solution based on all that information.However, we have seen how poorly this approach works in practice – and may not work at all.So, how correct Dr. Hayek’s view is!
With the advent of cryptocurrencies, it’s not hard to imagine a future in which governments and a range of intermediaries can peer into virtually every aspect of an individual’s financial life.Regulators may have a strong thirst for data, but this tendency is clearly incompatible with the essence of the free society that has made the United States glorious.
Therefore,Regulators must maintain humility and principles as they embrace the opportunities presented by cryptocurrencies.In the analog age, financial regulation is naturally limited by paper records, physical distance and manual processes.These delays, while inconvenient to the government, also naturally limit the amount of information the committee can obtain about any U.S. investor.However, in the digital age, these restrictions have been significantly reduced, making today’s discussion of cryptocurrencies and privacy-enhancing technologies even more important.
Public blockchains are more transparent than any previous traditional financial system.Every transfer of value is recorded on a ledger that anyone can review.On-chain analytics companies are already doing a great job assisting law enforcement in correlating on-chain activity with off-chain identities.In other words,If regulation goes in the wrong direction, cryptocurrencies could become the most powerful financial surveillance architecture ever created.
In fact, if governments treated every wallet as a broker, every piece of software as an exchange, every transaction as a reportable event, and every protocol as a node that could be easily monitored, then the government would turn the ecosystem into a financial panopticon.
At the same time, the technology also brings privacy protection tools that the analog world cannot offer, such as zero-knowledge proofs, selective disclosures, and wallet designs that allow users to prove compliance without providing full financial records or personal details to intermediaries or governments.We can envision a system in which regulated platforms can prove that their users have passed screening without permanently keeping detailed records of every payment, transaction or donation.
These tools will also help our market continue to run smoothly as we migrate to on-chain.The complete financial transparency inherent in public blockchains may inhibit important financial market activity.
For example, many institutions rely on the ability to open positions, test strategies, and provide liquidity without immediately exposing these activities to competitors and predatory traders.If every order, hedging transaction, and portfolio adjustment were visible in real time, we could invite front-running, copycat behavior, and “bandwagon selling,” which would make it harder for companies to manage risk.If every inventory imbalance or customer movement was immediately exposed to the market, the business of market making and underwriting would be significantly less attractive.
This technology makes it possible to balance the government’s interest in containing national security threats with the privacy interests of the American public.But to better achieve this balance, we must ensure that Americans do not immediately come under suspicion when using these tools.While ensuring that the government can perform these important functions, protecting citizens’ legitimate activities from mass surveillance is the best way to protect national security and basic civil liberties, while also providing room for innovation.
So the stakes are high – the issues before us are far-reaching and have lasting consequences.As we begin the roundtable, I’m eager to hear more insights from experts on how the Commission can protect Americans’ privacy and how cryptocurrency’s privacy tools can reduce, rather than increase, the need for large-scale financial surveillance.
I firmly believe that if we work together, we can build a framework that ensures that technological advancement and financial development do not come at the expense of individual freedoms.
Unfortunately, I am unable to attend the entire meeting due to other commitments, but I am very happy to be here with you today.Thank you all for taking the time to attend.Looking forward to the exciting discussions to come.
