Welcome to Crypto Long & Short, our weekly institutional newsletter featuring expert insights, news, and analysis for professional investors. This week, we explore the pressing issue of digital identity and its role in preventing fraud.
Tricia Gallagher, founder of Treasury Solutions Info Tech, discusses how state-led identity systems can provide a secure and user-controlled solution. The US has lost an estimated $5 trillion to fraud and improper payments, with most policy responses focusing on detection and recovery rather than addressing the underlying issue of identity.
Gallagher argues that a state-led approach, where individuals have control over their personal data, is essential for preventing fraud and promoting innovation. The current system, which relies on broad consent frameworks and limited transparency, is inefficient and expands the risk of misuse and security breaches.
In contrast, a state-led approach would enable trusted verification and privacy while preserving individual control over personal data. Utah's Digital Identity Bill of Rights, which takes effect in May 2026, provides a model for this approach, establishing clear principles for user control, data minimization, and verification.
By shifting to privacy-preserving, user-controlled credentials, states can reduce fraud, improve transparency, and strengthen accountability. As federal debates continue to focus on managing data within legacy systems, states have an opportunity to lead in a fundamentally different direction, one that prioritizes trust, rights, and individual control over identity and personal information.