SEC Holds First Privacy Roundtable! Tornado Cash Developer's Imprisonment Sparks Controversy

The U.S. Securities and Exchange Commission (SEC) has scheduled its first-ever roundtable discussion focused on privacy and financial surveillance for December 15. The partial conviction of Tornado Cash developer Roman Storm in June, the sentencing of Samourai Wallet developers in November, and the big pump in Privacy Coin prices have once again drawn the attention of high-level executives in the Crypto Assets industry to privacy issues.

SEC December 15 Privacy Coin Roundtable Meeting Agenda and Significance

The U.S. Securities and Exchange Commission (SEC) has scheduled a roundtable discussion on privacy and financial surveillance for December 15, marking the first formal meeting in SEC history to focus specifically on crypto privacy issues. Like other SEC roundtables, executives from the Crypto Assets industry and SEC officials will discuss common pain points and solutions, but no specific policy proposals will be submitted.

The symbolic significance of this meeting is substantial. For a long time, the SEC's regulatory focus on Crypto Assets has concentrated on compliance with securities laws, anti-money laundering (AML), and know your customer (KYC) requirements, while privacy protection has often been viewed as a concept in conflict with regulatory objectives. Now, the SEC's active establishment of a privacy roundtable indicates that the regulatory agency is beginning to acknowledge the crypto community's demands for privacy rights, as well as the widespread controversies arising from a recent series of developer lawsuits.

The format of the roundtable meeting is also noteworthy. This is not a hearing or a policy-making meeting, but a dialogue platform. The SEC sends a signal through this format: we are willing to listen to industry voices and seek a balance between privacy protection and financial supervision. This stands in stark contrast to the SEC's tough enforcement attitude towards the crypto industry in previous years.

The renewed focus on privacy can be traced back to the crypto punk roots of Crypto Assets and one of the core reasons for the invention of the encryption technology that underpins Crypto Assets - ensuring secure communication channels between parties in hostile environments. “When people have no privacy, dictators thrive. When those in power begin to turn against privacy protection, it is an important danger signal,” said Naomi Brockwell, founder of the Ludlow Research Institute, which advocates for freedom through technology.

The Tornado Cash and Samourai Wallet Cases Trigger Industry Panic

After experiencing a series of events, privacy has become a hot topic in the Crypto Assets community, with the most explosive being the partial guilty verdict against Tornado Cash developer Roman Storm in June. Tornado Cash is a mixing protocol on Ethereum that allows users to obscure the source of funds through smart contracts, protecting transaction privacy. Storm is accused of aiding money laundering and violating sanctions regulations, although the defense emphasizes that he is merely an open-source software developer and did not directly participate in any illegal activities.

Legal experts indicate that the ruling in the Storm case, along with other cases where open-source software developers have been convicted or imprisoned for creating non-custodial privacy protection protocols, sets a dangerous precedent for privacy technology in the United States. The core issue of this precedent is whether developers should be held criminally liable for how users employ their open-source tools.

In November, the sentencing of Samourai Wallet developers further exacerbated this panic. Samourai Wallet is a Bitcoin wallet focused on privacy, offering mixing features like CoinJoin. The developers were charged with conspiracy to launder money and operating a remittance business without a license, ultimately being sentenced to several years in prison. According to journalist and cryptocurrency advocate Lola Leetz, the verdict in the Samourai Wallet case is similar to the U.S. government's accusations against automaker Toyota for conspiracy, as terrorists and criminals also use their cars.

“People should not be held responsible for what others do with the tools they develop,” Litz said. This analogy, though extreme, reveals the core contradiction: if tool developers are to be accountable for all user behavior, then any technology that could potentially be abused will face legal risks, and innovation will be stifled.

Senior executives and advocates in the Crypto Assets industry believe that these lawsuits are intended to prevent developers from creating privacy-protecting tools. This chilling effect has already become apparent: many Privacy Coin technology developers choose to work anonymously or relocate projects to jurisdictions with looser regulations. Some teams that originally planned to develop privacy-enhancing features have also paused their work, waiting for regulatory clarity.

Key Case Timeline

June: Tornado Cash developer Roman Storm found guilty on some charges

August: The Department of Justice states it will no longer prosecute developers who simply write code.

November: Samourai Wallet developer sentenced to prison.

December 15: SEC Privacy Roundtable Meeting Held

Privacy Coin price big pump 80% market bets on regulatory shift

(Source: CoinMarketCap)

Privacy has become a hot topic, which is reflected not only at the legal level but also directly in market prices. Over the past two months, the prices of Privacy Coins have surged significantly, with the prices of Privacy Coins like Zcash skyrocketing since October, and some Privacy Coins experiencing increases of up to 80%. This price surge indicates that the market is betting on a potential shift in the regulatory environment.

The technical features of Privacy Coins make them a key focus for regulatory agencies. Privacy coins such as Zcash, Monero, and Dash utilize encryption technologies like zero-knowledge proofs and ring signatures, making transaction details (amount, sender, receiver) invisible to external observers. While this strong privacy protection aligns with the philosophy of crypto-punk, it has also raised concerns about money laundering and tax evasion.

However, the big pump in prices may also reflect the market's optimistic expectations for the SEC privacy roundtable meeting. If the SEC can demonstrate a more balanced stance in the meeting and recognize the legitimate uses of privacy technology, Privacy Coins may welcome new development opportunities. Some exchanges previously delisted Privacy Coins due to regulatory pressure, and if the regulatory attitude softens, relisting will bring liquidity improvements and price support.

From a technical development perspective, privacy protection technology is evolving. New generations of privacy protocols such as Railgun and Aztec Network are attempting to provide privacy protection while meeting compliance requirements, such as selective disclosure features that allow users to prove the legitimacy of their source of funds to regulatory authorities when needed. This “auditable privacy” may become a solution for the future.

The Justice Department's Stance and the Subtle Timing of the SEC Roundtable

In August, Matthew Galatioti, acting assistant attorney general of the Criminal Division of the Department of Justice, stated that the agency will no longer prosecute open-source software developers for writing code. “We believe that simply writing code, without malicious intent, does not constitute a crime,” Galatioti said. “The Department of Justice should not use prosecution as a legislative tool. The Department should not make innovators guess which actions could lead to criminal charges.”

This statement is quite significant in terms of timing, as it occurred after the Tornado Cash ruling and before the sentencing of Samourai Wallet. The Department of Justice's statement has been widely interpreted as a response to industry panic, attempting to draw a line: we are targeting malicious actors, not the technology itself. However, the binding nature of this statement is limited, as the decision to prosecute specific cases still rests with the prosecutor based on the circumstances of each case.

The SEC has chosen to hold a privacy roundtable on December 15, a timing that is also worth pondering. This date is only two weeks away from the end of the year, which is usually a time for government agencies to review policies and plan for the next year's work. Although the results of the meeting will not immediately form policies, they may set the regulatory direction for 2026. In addition, this timing also gives the industry and civil society ample time to prepare opinions and arguments.

From a broader regulatory trend perspective, the United States is not an isolated case. The EU's Markets in Crypto Assets Regulation (MiCA) also seeks to strike a balance between privacy and transparency, requiring service providers to implement AML/KYC, but not outright banning privacy technology. Regulatory bodies in various countries are gradually recognizing that privacy is not a binary choice, but rather a need to find the appropriate balance in different contexts.