America at a Crossroads: Commissioner Hester Peirce's Parting Challenge

It is incumbent upon us to continue Commissioner Peirce's mission, writes Will Schwartz, policy associate at the Blockchain Association.

Today marks Hester Peirce's final day as a Commissioner at the U.S. Securities and Exchange Commission. Her exit leaves a seat open on the five-member Commission at a time when the question she pressed hardest — whether the agency will write rules digital asset firms can actually follow rather than police them after the fact — remains unanswered. The digital asset industry — and every American who believes regulation should mitigate risk while fostering innovation — owes her an enormous debt of gratitude.

For more than eight years, Peirce served as a principled voice at the Commission. Under the previous SEC Chairman, she frequently dissented when the agency chose to bring enforcement actions rather than write rules the industry could actually comply with. Years before regulators were ready to listen, she proposed a token safe harbor — a framework that would have given token projects a limited runway to mature before federal securities registration obligations attached. She went on to lead the Crypto Task Force, the SEC's dedicated unit for developing a coherent regulatory approach to digital assets, insisting throughout that the agency's duty to protect investors meant it had to use its authority to provide regulatory guardrails for a rapidly expanding industry.

Peirce — long known in the industry as "Crypto Mom" — brought humility, conviction, and a sense of humor to work every day. Washington could use more like her. Although she will no longer be at the SEC, her presence and the ideals she stood for will live on.

Will Schwartz is a Policy Associate at the Blockchain Association, where he conducts research and analysis on digital asset legislation, regulation, and emerging policy developments.

Commissioner Peirce's Work Is Not Done Yet

In some of her last public remarks as Commissioner — delivered at the Securities Industry and Financial Markets Association's (SIFMA) Digital Assets Conference on September 23 (her full remarks are available on the SEC's website) — Peirce did not take a victory lap. Instead, she laid out the work that remains to be done, even in her absence.

As she described in the speech, society stands at a great crossroads. Down one road lies the world people have been living in: dragnet surveillance, the datafication of every aspect of life, and cybersecurity breaches that expose the most sensitive information to bad actors all around the world. Down the other lies a world of both privacy and security, where Americans can prove they are following the law without handing over their sensitive personal information.

Peirce has seen firsthand how the nation's financial regulations are designed to extract as much personal data from American consumers as possible. For more than 50 years, the regulatory framework — a regime with roots in statutes like the Bank Secrecy Act of 1970 — has been built on the mass collection and storage of personal data from all Americans who interact with the financial system. Businesses collect personal data from consumers and share it with the government, which aims to track down actual criminal activity — the "needle," as Peirce puts it, in the "haystack" of innocent, unassuming Americans' data.

The needle is rarely found in the haystack. Yet the law is designed as if the bigger the haystack, the easier it is to find the needle, when the opposite is true. The status quo leaves the government holding an enormous cache of consumer data that it must sift through in search of evidence of criminal activity.

The consequences of this mass collection and storage of data are stark. Centralized stores of data make breaches far more damaging, exposing consumers to greater harm and jeopardizing collective national security. Mandated disclosures also feed data brokers, which scrape public filings and records to build and sell detailed profiles that companies use to target, price, and profit from consumers. And mass surveillance leaves Americans — regardless of their political beliefs — vulnerable to censorship and discrimination.

The dire state of digital privacy will only worsen as artificial intelligence becomes more integrated into everyday life, collecting more data and enabling more sophisticated surveillance and profiling of individuals.

Another Path Forward

But America does not have to go down the road of endless surveillance. There is another path at Peirce's crossroads, one where consumer privacy is not sacrificed in the name of security. The two are not mutually exclusive, thanks to innovation in privacy-enhancing technology, much of which is native to the blockchain ecosystem.

Blockchain infrastructure may allow individuals to transact while maintaining complete control over their personal information, and transaction records are public and secure. Zero-knowledge proofs enable selective disclosure, allowing an individual to demonstrate that they are permitted to transact without disclosing any unnecessary information. Verifiable credentials can use this technology to prove that a person is trustworthy and genuine without revealing their identity.

The technologies that allow for a more private, consumer-centric digital economy already exist. As Peirce said in her remarks, "What is missing is the regulatory framework that would allow and encourage their adoption."

Our Turn

It is incumbent upon all of us to continue Peirce's mission. Technology exists that allows consumers to maintain control over their data while satisfying legal obligations — obligations that provide law enforcement with the information necessary to monitor transactions and pursue bad actors. What is needed is a regulatory framework designed for the modern era, one that allows privacy-enhancing technology to be used to minimize the unnecessary exposure of consumer data. Whether Washington writes that framework is now the measure of the mission she leaves behind.

That future is within reach, and it is a distinctly American one. As a nation, we have never accepted that liberty is the price of security. Peirce carried that conviction through eight years at the SEC. Now, it is our turn to carry it forward.

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Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates. This article originally appeared on CoinDesk.