The U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce has called for the protection of cryptocurrency privacy rights and open-source software development ahead of a key ruling in the trial of Tornado Cash co-founder.
Defending Crypto Privacy and Developers
On August 4, at the "Blockchain Science" conference, pro-crypto Commissioner Peirce emphasized that U.S. authorities should welcome privacy-protecting technologies and ensure individuals' rights to self-custody of digital assets. She pointed out that lawmakers and regulators must take concrete steps to ensure that people can transact privately and develop privacy software without fear.
Peirce mentioned that a recent presidential working group suggested that U.S. citizens and businesses should have the right to own digital assets and use blockchain technology for legitimate purposes; at the same time, entrepreneurs and software developers should enjoy the freedom and regulatory certainty to "upgrade various industries using these technologies."
She noted that even if centralized intermediaries or decentralized autonomous organizations (DAOs) impose usage restrictions in their DeFi applications, immutable, open-source protocols can still be permanently used by anyone, making it meaningless to force their inclusion in financial monitoring.
Peirce emphasized that developers of open-source privacy software should not be held responsible for third-party misuse of their software, citing SEC Chairman Paul Atkins' call for regulatory pathways to "release on-chain software systems that can operate without any central intermediaries" for developers.
She also stated that regulators should not require businesses to collect and report information about each other, saying, "That would make us act as neighborhood watchers—completely contrary to the principles of a free society; nor should they require intermediaries to intervene in peer-to-peer transactions."
It is worth mentioning that the U.S. Treasury Department and the Internal Revenue Service (IRS) officially repealed the controversial crypto rules that would have mandated decentralized exchanges to comply with broker reporting obligations in July. This rule was first proposed in the Infrastructure Investment and Jobs Act in November 2021, aimed at closing "tax loopholes" by expanding the definition of "broker" and requiring DeFi platforms to report trading profits and user names, addresses, and other information.
Tornado Cash Ruling Will Set a Key Precedent
Peirce's remarks come just as the verdict in the trial of Tornado Cash co-founder is about to be announced, a ruling that could have far-reaching implications for open-source developers. Many industry leaders believe that holding software developers criminally liable for third-party use of their code would set a dangerous precedent and stifle technological innovation in the U.S.
The background is that the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) sanctioned the crypto mixing protocol Tornado Cash in August 2022, citing its failure to effectively prevent malicious actors from laundering money through the protocol, including $455 million laundered by North Korea's "Lazarus" group. Following the sanctions, co-founder Roman Storm was detained in Washington in 2023, facing charges of conspiracy to commit money laundering, conspiracy to violate sanctions, and operating a money transmission business without a license.
Storm pleaded not guilty to all charges and was granted bail to continue appearing in court with a $2 million bond. His three-week trial began on July 14, and if convicted, he could face up to 45 years in prison.
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