The Blockchain Association and the DeFi Education Fund have raised concerns about the privacy implications of the U.S. Securities and Exchange Commission’s (SEC) newly operational Consolidated Audit Trail (CAT) database. The groups argue that the CAT could pose a significant threat to the privacy of millions of individuals and could be used to surveil digital asset transactions.
The CAT, which was implemented in May 2024, is designed to allow regulators to monitor securities markets on a consolidated basis. While the rule itself does not explicitly mention digital assets, both crypto groups believe that the SEC considers many crypto participants to be exchanges or brokers, and therefore subject to reporting requirements.
In an amicus brief filed in a class action lawsuit against the SEC, the groups warned that the CAT could turn blockchains into a massive repository of de-anonymized user data. By accessing even one superficially limited identity record, the government could potentially unlock a vast trove of unrelated financial transactions conducted by that user.
The groups also expressed concerns about the potential for data breaches and the vulnerability of the CAT database to hacks. They emphasized that the risk of data breaches is on the rise, despite increased spending on cybersecurity.
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The DeFi Education Fund’s Chief Legal Officer, Amanda Tuminelli, stated that the CAT could become a repository of user information associated with particular wallet addresses. “The privacy concerns here are severe,” she added.
The amicus brief was filed in support of a lawsuit brought by the National Center for Public Policy Research and two Texas residents against the SEC. Other organizations, including the American Securities Association, have also filed amicus briefs in the case.
The SEC has been actively pursuing enforcement actions against crypto firms and entities, alleging that many are operating as unregistered exchanges or brokers. The groups argue that the SEC’s current position on digital assets will likely result in digital asset trading platforms being required to report detailed transaction information to the CAT.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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