Zcash and privacy protocols face a “do-or-die” SEC meeting that determines if developers are personally liable for code

The SEC’s Crypto Task Force scheduled a four-hour roundtable on financial surveillance and privacy for Dec. 15, bringing together zero-knowledge proof developers, civil liberties advocates, and protocol executives to debate whether blockchain privacy tools can coexist with anti-money laundering enforcement.

The timing is deliberate. Two months ago, the co-founders of Samourai Wallet received five- and four-year prison sentences for operating what prosecutors called an unlicensed money transmitter that facilitated $237 million in illegal transactions.

Three months before that, a jury convicted Tornado Cash developer Roman Storm on unlicensed money-transmitting charges but deadlocked on money-laundering conspiracy and acquitted him on sanctions violations.

FinCEN’s proposed Section 311 rule targeting international cryptocurrency mixing as a “class of transactions of primary money laundering concern” remains unfinished, with its comment period closed since January 2024 and its final text expected in 2025.

Commissioner Hester Peirce, who leads the task force, framed the event as a chance to “recalibrate financial surveillance measures to ensure the protection of our nation and the liberties that make America unique.”

The panel list reads like a blueprint for what that recalibration might look like: Zcash founder Zooko Wilcox, Aleo CEO Koh, Espresso Systems CSO Jill Gunter, and SpruceID founder Wayne Chang represent the zero-knowledge and privacy-preserving computation camp.

Summer Mersinger from the Blockchain Association and J.W. Verret from George Mason Law School bring the policy and legal framing.

ACLU senior policy analyst Jay Stanley represents the civil liberties perspective that has historically treated financial surveillance as a Fourth Amendment pressure point.

The three-level squeeze on privacy tools defines the backdrop. Samourai’s sentences show the harshest operational-liability outcome for wallet-linked mixing: co-founders Keonne Rodriguez and William Lonergan Hill pleaded guilty, and Judge Denise Cote sentenced them in November 2025.

The DOJ treated Samourai as a mixer that enabled darknet markets, cyber intrusions, and transactions tied to sanctioned jurisdictions.

The theory is: if a software facilitates financial privacy and someone operates it as a service, they run an unlicensed money-transmitting business.

The Storm verdict draws a narrower line. The jury convicted him on the unlicensed transmitter conspiracy but deadlocked on the more serious money-laundering charge and acquitted him on sanctions-related conspiracy.

Prosecutors argued that Tornado Cash enabled over $1 billion in illegal transactions, including flows tied to North Korea-linked actors. Still, the jury showed greater comfort with punishing “money transmission” theories than with affirming the full “developer equals launderer” leap.

FinCEN’s Section 311 proposal is the regulatory overhang that makes the SEC roundtable feel coordinated with a broader federal posture.

The agency issued the notice of proposed rulemaking in October 2023, identifying international cryptocurrency mixing as a money-laundering concern and proposing enhanced recordkeeping and reporting requirements for covered financial institutions when they know, suspect, or have reason to suspect a transaction involves such mixing.

Legal analyses at the time noted how unusual it was for FinCEN to use Section 311 to target an activity class rather than a specific institution or jurisdiction.

The comment period ended in January 2024. A Unified Agenda entry indicated movement toward a final rule stage with a 2025 window.

As of early December 2025, FinCEN’s Special Measures list still shows the cryptocurrency mixing action as anchored to the 2023 finding, without a listed final-rule link, indicating the rule has not been finalized.

The gap between the NPRM and the final rule creates uncertainty about how aggressively FinCEN will institutionalize surveillance expectations for mixer-linked flows.

The privacy-preserving computation bet

The panelists represent a technical thesis: that zero-knowledge proofs, homomorphic encryption, and programmable privacy can satisfy compliance requirements without exposing transaction graphs to blanket surveillance.

Aleo, Espresso, Zcash, and similar projects build systems that allow users to prove they meet regulatory thresholds, are non-sanctioned counterparty, have complied with tax reporting requirements, and are accredited investors, without disclosing the full transaction history.

The theory assumes regulators will accept selective disclosure backed by cryptographic proof rather than requiring full ledger visibility as the default.

SpruceID’s Wayne Chang brings a complementary angle: decentralized identity systems that let users control attestations about compliance status without relying on centralized intermediaries.

The counterargument, implicit in the Samourai and Storm prosecutions, is that privacy-by-default architectures obscure enforcement sight lines too much.

Prosecutors argued that Tornado Cash and Samourai enabled bad actors precisely because the tools did not distinguish between legitimate privacy use cases and criminal obfuscation.

The DOJ’s position treats privacy tools as infrastructure that must be designed with law enforcement access built in, not bolted on.

That framing collapses the distinction between “tool” and “service” and treats developers who deploy privacy-preserving code as operators of financial services subject to Bank Secrecy Act obligations.

What the SEC gains from this conversation

The roundtable gives the SEC a public record on whether privacy-preserving technology can meet securities law obligations.

The commission does not regulate mixing directly; that is, FinCEN and DOJ territory. However, it governs the issuance, trading, and custody of digital assets that could be structured with privacy features.

If a tokenized security uses zero-knowledge proofs to hide transaction details, does that violate broker-dealer reporting requirements?

Can an alternative trading system use privacy-preserving computation to match orders without disclosing pre-trade information to competitors while still meeting Regulation ATS transparency rules?

The roundtable panelists will potentially answer those questions live, on the record, with Chairman Paul Atkins and Commissioners Mark Uyeda and Hester Peirce present.

The timing also lets the SEC position itself relative to FinCEN.

If FinCEN finalizes the Section 311 mixer rule with broad restrictions, the SEC can point to its December roundtable as evidence that it explored whether technology could solve the compliance problem before defaulting to prohibition.

On the other hand, if FinCEN softens the rule or delays it further, the SEC’s roundtable becomes a signal that the administration is open to privacy-preserving solutions that meet law enforcement needs.

Either way, the event builds a record that lets the SEC claim it consulted technologists, civil libertarians, and industry before deciding how to treat privacy in digital asset regulation.

The SEC now decides how much weight to give privacy-preserving computation in its own rulemaking.

If the roundtable reaches consensus that zero-knowledge proofs can meet compliance obligations, the commission can incorporate that flexibility into broker-dealer, ATS, and custody rules for digital assets.

If the roundtable fractures into “privacy is a right” versus “privacy enables crime” camps, the SEC defaults to existing surveillance-heavy frameworks and leaves privacy advocates to litigate in court.
The Samourai sentences and the Storm verdict, for now, have already defined the boundaries of criminal liability.

The Dec. 15 roundtable decides whether there is space inside those boundaries for privacy-preserving technology to exist at all.

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