WASHINGTON, D.C. — The federal government could tap into the crypto sector’s potential for mass surveillance if not checked by formal policies, said SEC Chairman Paul Atkins, arguing that the industry is — alternatively — also capable of designing systems that screen users for proper illicit-finance protections without jeopardizing their privacy.

“It’s no great leap to imagine a steady migration toward a future where the government in a constellation of intermediaries can peer into almost every dimension of the individual’s financial lives,” Atkins said at a financial surveillance and privacy roundtable hosted at the agency’s Washington headquarters on Monday — the sixth crypto-tied roundtable this year.

“While regulators may have…