US Securities and Exchange Commission (SEC) Commissioner Hester Peirce has taken a strong stance in favour of digital privacy and open-source development, just as the high-profile Tornado Cash trial nears its conclusion. Speaking at the Science of Blockchain Conference, Peirce urged regulators to protect individuals’ rights to transact privately, comparing digital privacy to traditional freedoms enshrined in the US Constitution.
Peirce emphasised that privacy-preserving technologies and self-custody of crypto assets are essential and must not be compromised. She argued that developers of open-source protocols like Roman Storm, the co-founder of Tornado Cash should not be held liable for how others use the software they create.
“We should take concrete steps to protect people’s ability not only to communicate privately, but to transfer value privately,” she said, referencing the way people once transacted with physical coins.
Tornado Cash and the Storm on Trial
Roman Storm is currently on trial in the Southern District of New York. Along with fellow co-founder Roman Semenov, he helped build Tornado Cash, a cryptocurrency mixing service that allows users to obscure the origin and destination of digital assets. The tool has been criticised by regulators, who allege it has been used for money laundering and by criminal groups.
Storm faces up to 40 years in prison if convicted. The prosecution argues that Tornado Cash knowingly facilitated illegal activity. Meanwhile, the defence and many in the crypto community argue that Tornado Cash is merely a neutral tool, similar to how a messaging app can be used for both good and bad.
This case could set a major precedent. If Storm is found guilty, it may open the door to holding developers legally responsible for how people use open-source code, even when the developers have no control over the code’s deployment or use.
Lessons from the 1990s Crypto Wars
Peirce likened today’s debate over privacy and crypto to the “Crypto Wars” of the 1990s, when the US government tried to stop the spread of strong encryption for national security reasons. That effort failed, in large part due to public resistance and court challenges.
One key figure from that era was Phil Zimmermann, who developed Pretty Good Privacy (PGP), an encryption tool. His battle helped ensure strong encryption would be legally available, enabling the rise of secure online banking, e-commerce, and private communication.
Peirce sees a similar dynamic at play today. She warned that stifling innovation in privacy technologies could slow the progress of the entire blockchain and Web3 space.
“The internet could not have succeeded without strong cryptography,” she reminded the audience.
DeFi Broker Rule: “Dead for Good”
In her speech, Peirce also condemned the now-defunct DeFi broker rule, a controversial proposal from the Biden administration that would have required decentralised finance (DeFi) platforms to report user data to the Internal Revenue Service (IRS). The rule, which was dropped by President Trump in April 2025, would have required DeFi protocols to keep detailed records of users and their transactions.
Peirce strongly opposed such measures, arguing they would turn private businesses and individuals into government surveillance tools.
“Doing so would deputize us to surveil our neighbours—a practice antithetical to a free society,” she said.
Instead, Peirce called for regulators to accept that technologies like DeFi and crypto mixers can be used for both legitimate and illegitimate purposes, just as the internet itself can be.
A Critical Moment for Crypto Privacy
The Tornado Cash trial, and the broader regulatory climate around crypto privacy, may determine the future of open-source development in the blockchain space. Developers, advocates, and industry leaders are watching closely, fearing that a guilty verdict could criminalise writing or publishing code that enhances privacy.
Peirce’s comments provide rare support from within the SEC for the rights of developers and the importance of privacy. As lawmakers and courts continue to shape the digital landscape, her speech serves as a timely reminder of the core freedoms at stake.
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