An SEC official drops the act
TechFlow Selected TechFlow Selected
An SEC official drops the act
Regulators rebel, SEC officials champion privacy.
Navigating Web3 tides with focused insightsBy: Liam
In the world of cryptocurrency, government regulation is typically seen as the biggest obstacle to the development of privacy technologies.
But on August 4, SEC Commissioner Hester Peirce delivered a stunning speech at the University of California, Berkeley, citing the Cypherpunk Manifesto, openly criticizing America's financial surveillance system, and championing privacy-enhancing technologies like zero-knowledge proofs and decentralized networks.
This regulator, known as the "Crypto Mom," has rarely sided with the regulated—and in this case, she went further than many crypto enthusiasts.
This was a regulator's awakening.
Peanut Butter and Watermelon: A Regulator’s Awakening
August 4, University of California, Berkeley.
SEC Commissioner Hester Peirce delivered a speech that left the audience stunned. The title? "Peanut Butter and Watermelon: Financial Privacy in the Digital Age." At first glance, it sounded like a food talk—but in reality, it was a fierce attack on the existing financial regulatory framework.
Peirce opened with a family anecdote: her grandfather hated watermelon, so he’d cover it thickly with peanut butter to make it palatable. This odd combination always drew curious neighborhood kids during summer picnics. Years later, when a telephone operator called her grandfather, she asked: "Are you the Mr. Peirce who puts peanut butter on watermelon?"
It turned out the operator was one of those childhood onlookers.
Peirce wasn’t interested in peanut butter and watermelon per se—her focus was on the telephone operator, a profession soon to be eliminated by technology. Automated switching systems later allowed people to dial directly, removing human intermediaries and, more importantly, eliminating neighbors eavesdropping on private calls.
Hester Peirce was supposed to be a staunch defender of financial regulation. She graduated from Case Western Reserve University School of Law, spent years grinding in the Senate Banking Committee, and was appointed to the SEC by Trump in 2018.
The crypto industry gave her a catchy nickname—"Crypto Mom"—because she’s far more crypto-friendly than other regulators. But in this speech, she completely dropped the温和 facade and laid her cards on the table.
"We cannot expect governments, corporations, or other large, impersonal organizations to protect our privacy out of goodwill."
This quote comes from Eric Hughes’ 1993 "Cypherpunk Manifesto," a work by a technological anarchist. A government official quoting an anarchist to criticize the government—it’s as strange as a police officer using a criminal’s words to denounce law enforcement.
But Peirce wasn’t done.
She continued: "Where law fails due to design flaws or inadequacies, technology might step in."
This doesn’t sound like something a civil servant should say—it sounds more like rallying cries for a tech revolution.
The Sledgehammer
Peirce’s real fire was directed at the current financial surveillance regime.
She launched a scathing critique of the "third-party doctrine," a legal concept allowing law enforcement to access your bank-held information without a warrant. As a government employee, she criticized her own employer for treating this doctrine like a universal sledgehammer.
"The third-party doctrine is a key pillar of financial surveillance in this country," she pointed out an absurdity: banks can use encryption to protect customer data from theft, but under the third-party doctrine, customers have no reasonable expectation of privacy over that encrypted data. In other words, banks can protect your data from thieves, but the government can access it anytime it wants.
Next, she targeted the Bank Secrecy Act. This nearly 60-year-old law requires financial institutions to establish anti-money laundering programs—in effect, turning banks into government informants.
The numbers are staggering.
In fiscal year 2024, 324,000 financial institutions submitted over 25 million transaction reports to the government, including 4.7 million "suspicious activity reports" and 20.5 million "currency transaction reports."
"The Bank Secrecy Act has turned U.S. financial institutions into de facto law enforcement investigators," Peirce said bluntly. The government has created an atmosphere where "better to err on the side of over-reporting than miss one suspect," resulting in a flood of useless data drowning out genuinely valuable leads.
Even worse, Peirce didn’t spare her own agency.
The SEC’s Consolidated Audit Trail (CAT) system monitors every stock and options trade from order to execution. She and her colleagues described the system as a "product of a dystopian surveillance state." Not only does it burn money—costing $518 million by the end of 2022, nearly eight times the original budget, and still unfinished—but it also allows thousands of SEC staff and private contractors to access anyone’s trading records at will, even without suspicion of criminal activity.
Imagine an FBI agent publicly criticizing wiretapping laws, or a tax official defending tax evasion—Peirce had positioned herself against the system.
Technological Redemption
Since the law offers little hope, Peirce places her faith in technology.
She publicly endorsed a suite of privacy-preserving technologies: zero-knowledge proofs (ZK), smart contracts, public blockchains, and decentralized physical infrastructure networks (DePIN)—concepts familiar to any seasoned crypto veteran.
The appeal of these technologies lies in bypassing traditional intermediaries.
Zero-knowledge proofs let you prove your identity or age without revealing anything else; privacy mixers obscure your income, donations, and purchase history; decentralized networks eliminate centralized service providers altogether. Some blockchains come with built-in privacy features, protecting sensitive information much like private phone lines once did.
Peirce even echoed the radical view hinted at by Hughes in the Manifesto: these technologies must be allowed to develop freely, "even if some people misuse them."
Coming from a government regulator, these words carry exceptional weight.
She invoked historical lessons. In the 1990s, the government sought to control strong encryption for national security. But the internet couldn’t thrive without encryption, and a group of determined cryptographers pushed back, ultimately convincing the government to allow public use of encryption.
Phil Zimmermann, creator of PGP software, was one of the heroes.
Thanks to their efforts, we now enjoy secure email, online banking, and e-commerce. Peirce elevated privacy protection to a constitutional level. Quoting Supreme Court Justice Louis Brandeis: "The greatest dangers to liberty lurk when government’s purposes are benevolent."
She called on the government to protect people’s ability "to transfer value privately, just as they could with cash in the era when the Fourth Amendment was written."
"A key component of human dignity is the ability to decide for oneself to whom one reveals one’s thoughts and actions."
She emphasized, "The American people and the government alike should eagerly protect the right to live privately and to use privacy-enhancing technologies."
The timing of her speech coincided with the trial of Tornado Cash co-founder Roman Storm—a prime example of the government cracking down on privacy tech. Peirce made her stance clear: "Developers of open-source privacy software should not be held liable for how others use their code."
More Radical Than the Geeks
Interestingly, Peirce doesn’t fully align with Hughes—she’s actually more radical.
Hughes wrote in the Manifesto: "If two parties have a transaction, each remembers it. Each can talk about their memory—who can stop them?" This, in effect, defends the third-party doctrine: if you give your information to a bank, of course the bank can share it with the government.
But Peirce is attacking precisely that doctrine, arguing that even when information is held by third parties, individuals should retain privacy control.
The contrast is striking: Hughes, a technological anarchist, accepts certain harsh realities; Peirce, an insider in the system, demands more radical privacy protections.
In my view, this resembles "convert's zeal"—like South Korean Christian missionaries passionately spreading their faith worldwide.
Of course, as a regulator, she understands the flaws of the current system better than most. Her long regulatory experience has led her to realize that true protection may not come from more oversight, but from technological solutions themselves.
Yet changing societal attitudes isn't easy.
Hughes once said: "For privacy to become widespread, it must become part of a social contract."
Peirce acknowledges this challenge. Whenever she criticizes financial surveillance, someone inevitably says: "I’ve done nothing wrong—what’s wrong with the government monitoring everyone to catch bad guys?" She counters with privacy scholar Daniel Solove: "The 'I have nothing to hide' argument reflects a narrow understanding of privacy, deliberately ignoring the broader harms of government surveillance programs."
Over thirty years ago, Hughes wrote: "We cypherpunks invite your questions and concerns, hoping to engage in dialogue with you."
Thirty years later, Peirce answered that call with this speech.
What makes Peirce compelling is precisely her contradictory position: a regulator championing the very technologies she’s meant to oversee; a government official quoting anarchists to criticize government policy; a guardian of the traditional financial system endorsing the decentralized revolution.
If Hughes were alive today and heard Peirce’s speech, he might feel deeply reassured—and simply say: "You’re one of us!"
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
深潮TechFlow
