Peirce Pushes for KYC Overhaul with Zero-Knowledge Proofs

SEC Commissioner Hester Peirce is pushing for a change in how financial institutions verify customer identities, citing concerns over data collection and security. Speaking at SIFMA's Digital Assets Conference, Peirce argued that the current 'know your customer' (KYC) regime relies on collecting sensitive information from customers, which can then be used by hackers to target them. She said this approach creates 'ever bigger data haystacks' that make it harder for regulators to find suspicious activity.

Peirce suggested using zero-knowledge proofs and attribute-based credentials to verify facts such as age or sanctions status without exposing personal data. This technology, she noted, is already used in private cryptocurrency networks like Zcash. By relying on these methods, financial institutions could reduce the risk of data breaches and protect customer information.

The remarks come amid a series of high-profile data leaks, including one involving Revolut, which exposed customers' passports and Bitcoin transaction histories. Peirce warned against 'data maximalists' who assume that collecting more information is always better and instead advocated for regulators to allow firms to rely on third-party identity verification.