Welcome to Crypto Long & Short, our institutional newsletter offering insights, news, and analysis for professional investors. This week, we delve into the topic of fighting fraud in the digital age. Tricia Gallagher, founder of Treasury Solutions Info Tech, writes about the estimated $5 trillion lost to fraud and improper payments in the United States, highlighting the need for a state-led approach to digital identity. The current system, which relies on detection, recovery, and enforcement, is flawed, and a new framework is required.
A growing movement advocates for individual control over personal data, rather than it being held by banks, technology platforms, or governments. The lack of transparency and control over data sharing hinders innovation, reduces competition, and slows economic growth.
Two major policy debates in Washington reflect this issue: reducing fraud and improper payments, and control of consumer financial data. While policymakers are responding, their efforts are largely constrained by the current system.
The solution lies in enabling trusted verification and privacy while preserving individual control over personal data. States have a critical role to play in this, as they have long been the primary issuers of identity documents.
The future of digital identity will require states to become the anchor of trust, shifting from centralized data silos to privacy-preserving, user-controlled credentials. Utah's Digital Identity Bill of Rights is a notable example, placing individuals at the center of how their identity is used and shared. The goal is to modernize how trust is expressed, reducing fraud, improving transparency, and strengthening accountability. As federal debates continue, states have an opportunity to lead in a fundamentally different direction, one that restores individual control over identity and personal information.