SEC Commissioner Hester Peirce says KYC/AML rules have led firms to retain sensitive customer data beyond compliance needs. Zero-knowledge proofs could verify facts without exposing records, but rules for disclosing identities to investigators remain unsettled.
Peirce pointed to zero-knowledge proofs and attribute-based credentials, which can confirm a condition—such as meeting an age threshold or qualifying for an investment—without an institution receiving the underlying documents. Remco Bloemen, World Foundation’s head of blockchain, told TheStreet that production-grade age-verification tools already exist and the technology is mature.
This would not mean anonymous transactions: firms still face duties to monitor activity, flag suspicious transactions and, in some cases, disclose a person’s identity to authorized investigators. The disclosure rules remain a design question, and wider adoption would require regulators to allow real-world testing and court challenges. FinCrime Central says KYC breaches have exposed hundreds of millions of records in recent years.
