SEC Commissioner Pearce calls for an end to panoramic prison-style regulation on the eve of his resignation

At the SIFMA digital asset meeting in New York on Wednesday, outgoing SEC Commissioner Hester Peirce suggested that technologies such as zero-knowledge proof and attribute-based credentials could allow users to prove they meet compliance requirements like age or sanction status without revealing personal information such as name, income, address. This would replace the current highly invasive data collection model of KYC . The statement is valid at a time when events like KYC - data breach are occurring frequently, making it relevant for the entire crypto and financial industry's compliance technology roadmap.

The bigger the haystack, the harder it is to find needles

Known in the industry as a "crypto mom" for her longtime friendship with the crypto industry, Pearce criticized the current KYC and AML systems at the conference on the false premise that authorities can identify criminals from among law-abiding citizens by collecting enough information about them.

She went on to warn against data maximalists, who argue that this kind of thinking will only lead to more data collection and control by intermediaries, turning financial infrastructure into a panoramic prison wall.

She suggests that regulators allow businesses to rely on third-party authentication services, rather than having each agency independently copy and store the same batch of sensitive records in dozens of agencies.

Technically ready-made solutions

At the heart of Pearce's argument is zero-knowledge proof , a method for verifying whether something exists without revealing its underlying data, and the basic technology behind private encryption networks such as Zcash . She says that in this way, trading pair can confirm that someone meets certain requirements but does not know your name, income or address. She calls on regulatory frameworks to actively encourage these types of attribute-based authentication methods.

data breach makes the appeal more realistic

The background for this view is the recent KYC data breach: Financial tech company Revolut leaked customer's passport information and complete transaction history of Bitcoin after responding to a falsified government data request; third-party vendor hacking into hardware wallet manufacturer Trezor , which exposed tens of thousands of customers, subsequently triggering targeted phishing attacks.

Such leaks also increase the risk of so-called phishing attacks, where criminals directly threaten to extort money from people after knowing their identities and wealth.

Last words before leaving office

Pearce had previously made a similar claim at an blockchain meeting in August 2025. She disclosed that the speech coincided with her second consecutive work week as Commissioner of SEC . As a long-time critic of the agency's practice of bribing law enforcement and regulators, she reiterated this issue during her closing remarks, leaving room for discussion on how to design compliance frameworks for data minimization among subsequent levels of regulation.