SEC Chair Warns of Crypto Surveillance Risks, Urges Privacy-First Regulation

U.S. Securities and Exchange Commission Chairman Paul Atkins warned that without clear and formal policies, the federal government could exploit the crypto sector as a tool for mass financial surveillance, raising serious concerns about privacy and civil liberties. Speaking at a crypto-focused roundtable on financial surveillance and privacy at the SEC’s Washington headquarters, Atkins emphasized that while blockchain technology offers transparency, it also carries the risk of becoming an unprecedented surveillance mechanism if misused by regulators.

Atkins argued that the government’s growing appetite for financial data is fundamentally incompatible with the values of a free society. He pointed to existing regulatory tools, such as the SEC’s consolidated audit trail and post-2008 reporting requirements, as examples of how well-intentioned oversight can expand into intrusive monitoring. According to Atkins, blockchain technology could amplify these risks, potentially evolving into what he described as the “most powerful financial surveillance architecture” in history.

At the same time, Atkins acknowledged that the crypto industry itself is capable of designing systems that effectively address illicit finance concerns without sacrificing user privacy. He stressed that government policies should protect lawful financial activity from bulk surveillance, rather than treating every wallet, protocol, or transaction as inherently suspicious.

The SEC’s comments come as the agency accelerates its crypto regulatory agenda under President Donald Trump’s “Project Crypto.” Key initiatives include narrowing the definition of crypto securities, setting standards for tokenized securities, and introducing an innovation exemption to allow crypto firms to test new products more easily. Atkins has also emphasized closer cooperation with the Commodity Futures Trading Commission and has reiterated his view that most digital assets do not qualify as securities.

SEC Commissioner Hester Peirce echoed these sentiments, cautioning against imposing Bank Secrecy Act obligations on software developers who do not control user assets. As crypto legislation and rulemaking move forward, Atkins warned that overregulation could turn the digital asset ecosystem into a financial panopticon, undermining both innovation and individual freedom.