Welcome to Crypto Long & Short, our weekly institutional newsletter. This week, we delve into the world of digital identity and explore how state-led solutions can help prevent fraud and give individuals control over their personal data.
Tricia Gallagher, founder and principal of Treasury Solutions Info Tech, discusses the need for a shift away from band-aid solutions and towards a re-architecture of our digital identity framework. The United States has lost an estimated $5 trillion to fraud and improper payments, with most policy responses focusing on detection, recovery, and enforcement rather than addressing the underlying issue of identity.
A growing movement emphasizes that identity and control over personal data belong to the individual, not to banks, technology platforms, or the government. However, individuals often lack meaningful visibility or control over their data, which can limit their ability to access new financial services and constrain innovation. The current model requires individuals to surrender control of their identity and personal data to participate, which can lead to inefficiencies, security breaches, and erosion of individual agency.
Two major policy debates in Washington reflect this tension: reducing fraud and improper payments, and control of consumer financial data. Policymakers are responding, but largely within the constraints of the current system. The core challenge is not simply data protection, but how to enable trusted verification and privacy while preserving individual control over access to personal data.
States have a critical role to play in leading the next phase of digital identity infrastructure, positioning them to become the anchor of trust by re-architecting how trust is expressed. Utah provides a clear example, introducing a Digital Identity Bill of Rights that places individuals at the center of how their identity is used and shared.
The goal is not to remove the state, but to modernize how trust is expressed, reducing fraud, improving transparency, and strengthening 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 reduces reliance on centralized data and restores individual control over identity and personal information.