SEC Chief: Cryptocurrencies can become a tool for mass surveillance or privacy protection – it depends on us

The example chosen by the Joe Biden administration illustrates how important the balance between financial security and citizens’ freedom is. During a recent roundtable on cryptocurrencies, Paul S. Atkins, chairman of the SEC, delivered a speech highlighting a key issue for the future of the blockchain ecosystem.

Wire or sanctity? Blockchain as a potential system of total surveillance

The main message of Chairman Atkins’s example was caution against the wrong regulatory direction. Atkins explicitly stated: if the government treats every wallet as a broker, every code as an exchange, and every transaction as an event requiring reporting, cryptocurrencies could transform into the most powerful financial oversight architecture in history.

This vision, which the SEC chairman described as a “financial panopticon,” was the centerpiece of his speech example. Blockchain is inherently more transparent than any traditional financial system—each transaction is recorded in a publicly accessible ledger. Companies analyzing blockchain activity can already effectively link on-chain activity with off-chain identities.

Analog era vs. digital age: how oversight has changed

In the era of paper and physical documents, the government naturally had limited data collection capabilities. Processes were slow, physical distances hampered information flow, and documentation was a dispersed system. These inconveniences for the government effectively protected citizens’ privacy.

Today, in the digital age, these barriers have almost entirely disappeared. That’s why discussions about privacy-preserving technologies in blockchain are becoming crucial for regulators.

Are there tools to balance security and freedom?

The example of Atkins’s speech shows that the answer is: yes. Blockchain technology offers solutions that the analog world did not have:

• Zero-knowledge proofs – allow verification of facts without revealing details
• Selective disclosure – enables users to demonstrate compliance without sharing full financial records
• Protective wallet projects – provide user verification without permanently storing details of each transaction

Atkins suggests a model where regulated platforms can confirm that their users have passed (compliance) verification without the need to archive the entire payment history or personal data.

The problem of full transparency: what about effective market activity?

The SEC chairman also raised a practical issue: the inherent transparency of public blockchains could paralyze significant activity in financial markets. Traditional financial institutions need the ability to build positions and test strategies without immediate disclosure to competitors.

If every order, every hedge transaction, and every portfolio adjustment is visible in real-time, we could experience:

• Front-running phenomena
• Strategy copying by competitors
• Herd effect (herd effect)
• A drastic decline in market-making and underwriting attractiveness

This means data protection should not mean complete transparency – we need a more sophisticated approach.

Lesson from Hayek: government power vs. individual freedom

Atkins referred to Friedrich von Hayek’s views from the book “The Fatal Conceit.” The Austrian economist criticized the belief that gathering enough wise officials in one room and amassing vast amounts of information leads to perfect solutions. History shows that such approaches rarely work in practice.

Blockchain technology gives us a chance to reconsider this fundamental contradiction: how to protect national security and fight financial fraud while maintaining individual privacy and the right to manage one’s affairs independently?

The way forward: SEC’s duty

Chairman Atkins admitted that the SEC has itself created tools that collect vast amounts of data—from the Consolidated Audit Trail (CAT) to swap repositories. Although these aimed to protect investors and market security, “the government’s insatiable appetite for data” has caused them to grow beyond their original purpose.

Atkins announced measures to limit the most sensitive elements of data in the CAT and to reassess its scope and costs.

Conclusion: the future depends on today’s choices

The example of Atkins’s speech points to a fundamental reality: cryptocurrencies and blockchain could become the most powerful financial oversight tool in history—or its defense. The outcome depends on the decisions regulators make today.

The SEC chairman emphasized that there is a path to reconcile technological innovation, financial security, and citizens’ privacy—but it requires humility, principled guidance, and genuine collaboration among experts. The question is: will we be able to find it before it’s too late?