Peirce Targets Crypto KYC Honeypots Ahead of Stablecoin Rules
US Securities and Exchange Commission (SEC) Commissioner Hester Peirce is calling for an end to the practice of financial firms stockpiling customer data after breaches exposed the cost of mandatory identity collection. She wants to see a shift towards reusable digital credentials that establish facts about customers without requiring every firm to collect underlying personal information.
The SEC Commissioner made her comments this week, highlighting recent security incidents at major financial platforms like Revolut and Coinbase. In both cases, attackers were able to obtain sensitive customer information, including identity documents, addresses, and other details collected for anti-money laundering (AML) and know-your-customer (KYC) requirements.
Peirce argues that regulators should reconsider whether institutions need particular pieces of information or merely need confirmation of the facts those records establish. She suggests using attribute-based credentials to prove a customer's age, citizenship, or sanctions list status without revealing additional personal details.
The comments come as Washington builds a new compliance regime for stablecoins, with the GENIUS Act requiring permitted payment stablecoin issuers to maintain customer-identification programs. Regulators are proposing rules that would continue to require covered issuers to obtain and retain identifying information from customers.