Why is the SEC Concerned about Privacy now?

At DevConnect 2025, Sebastian and Friederike speak with Peter Van Valkenburgh about the rapidly evolving battle for digital rights. Peter challenges the industry's comfort with transparency, arguing that "transparency will destroy neutrality." He uses the history of SWIFT to illustrate how a once-neutral messaging system was captured by geopolitical interests because it wasn't "technically blind" to the data it processed. He argues that for blockchains to survive as global settlement layers, they must be "actually blind" to transactions, making neutrality a technical reality rather than a policy choice. The conversation turns to the aggressive legal tactics currently deployed against developers. Peter highlights the Pereira Bueno case, where prosecutors charged MEV searchers with wire fraud for being "dishonest validators" a concept Peter argues completely undermines the game-theoretic security of permissionless networks. He also breaks down the mixed bag of Tornado Cash litigation. While the sanctions against the protocol were successfully challenged and invalidated for Americans, the criminal conviction of developer Roman Storm for "unlicensed money transmission" sets a terrifying precedent for anyone publishing open-source code. On a constructive note, Peter introduces Coin Center's "John Hancock Project," which advocates for replacing the current, ineffective KYC/AML regime (which seizes less than 1% of illicit funds) with a system based on privacy-preserving attestations and self-sovereign risk scores. Finally, Peter shares surprising optimism regarding the US Securities and Exchange Commission (SEC). He notes that under the influence of Commissioners Hester Peirce and Paul Atkins, the agency has shifted from an aggressive adversary to a potential ally, openly discussing the benefits of full asset tokenization and the constitutional necessity of financial privacy. Topics 00:00 The Telegram vs. Signal security rant 05:15 The "Transparency Paradox": Why transparent Layer 1s cannot remain neutral in the long run 10:40 The SWIFT Analogy: How a neutral messaging layer became a politicized settlement enforcer 15:50 The Pereira Bueno Case: Why labeling MEV strategies as "wire fraud" threatens all validators 23:10 L2 Sequencing Risks: Centralization and the need for "dumb pipes" 28:30 The Failure of KYC: Why 99.8% of illicit funds are missed and the cost of mass surveillance 35:00 The "John Hancock Project": Using ZK-proofs and attestations to replace identity surveillance 42:15 Tornado Cash Update: Sanctions invalidated vs. the dangerous precedent of Roman Storm’s conviction 49:00 The SEC's 180: Hester Peirce, Paul Atkins, and the push for tokenized equities

Links mentioned in the episode: Gnosis: https://gnosis.io/ Coin Center: https://www.coincenter.org Epicenter - All Episodes: https://epicenter.tv/ Report: Tear Down This Walled Garden: https://www.coincenter.org/tear-down-this-walled-garden/ Pereira Bueno Amicus Brief: https://www.coincenter.org/amicus-brief-mev-wire-fraud/ Peter on X: https://x.com/valkenburgh Sebastian on X: https://x.com/seb3point0 Friederike on X: https://x.com/tw_tter

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