Peirce Urges Regulators to Use Zero-Knowledge Proofs in Crypto KYC and Tokenized Stocks

SEC Commissioner Hester Peirce has made a call to action for regulators to adopt zero-knowledge proofs in Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance. In her September 23 speech at the SIFMA Digital Assets Conference, she argued that relying on digital credentials can help firms verify customer identities without exposing sensitive records.

Pierce pointed out that current KYC and AML rules require financial institutions to collect large amounts of personal data, which can lead to a 'panopticon' effect. She proposed the use of attribute-based credentials, which could confirm facts such as age, citizenship, or investor status without revealing underlying records.

She also suggested making it easier for firms to rely on trusted third parties for identity checks, rather than collecting data themselves. Pierce acknowledged that her views were personal and did not necessarily represent the SEC's official stance.