SEC discusses the future of privacy and surveillance in the digital asset era

The SEC will hold a four-hour roundtable on December 15 to discuss financial oversight and privacy, with participation from zero-knowledge proof developers, civil liberties organizations, and industry leaders. The event comes amid increasing federal pressure on anonymity tools, following prison sentences related to the Samourai wallet and the Tornado Cash verdict involving allegations of operating an unlicensed money transmission service.

FinCEN’s unfinished proposal under Section 311, targeting international coin mixing as a high money-laundering risk transaction, sets an important policy context. The final rule is expected in 2025 but has not yet been issued.

Speakers represent a new technological approach, where zero-knowledge proofs and programmable privacy could enable compliance requirements to be met without exposing all transaction data. However, recent prosecutions demonstrate an opposing view: “privacy-by-default” systems undermine law enforcement capabilities and may be regarded as unlicensed money transmission services.

For the SEC, the roundtable is an opportunity to build a public record to assess whether privacy-preserving technologies can meet obligations under securities law, such as broker-dealer reporting or transparency under Reg ATS for tokenized securities.

The outcome of the discussion will influence whether the SEC integrates privacy-preserving technology into future digital asset regulations or maintains the current stringent oversight framework. The Samourai and Tornado Cash cases have set the boundaries of criminal liability; the December 15 roundtable will indicate whether privacy technology has room to exist within those boundaries.