SEC Commissioner Seeks End to Crypto's KYC Honeypots

SEC Commissioner Hester Peirce is calling for financial institutions to stop collecting and stockpiling customer data after security breaches exposed the risks of mandatory identity collection.

The problem resurfaced recently with security incidents at Revolut and Coinbase, where attackers obtained sensitive information from customers' accounts.

Pierce said regulators should reconsider whether institutions need particular pieces of information or merely need confirmation of the facts those records establish. She suggested using reusable digital credentials that can prove a customer's identity without revealing personal information.

The issue becomes more pressing as Washington builds a new compliance regime for stablecoins, which require permitted payment issuers to maintain customer-identification programs and retain identifying information from customers.