Welcome to Crypto Long & Short, our institutional newsletter. This week, we explore the future of digital identity and the shift towards state-led, user-controlled systems.
By Tricia Gallagher, founder of Treasury Solutions Info Tech, the estimated $5 trillion lost to fraud and improper payments in the US highlights the need for a new approach. Current policy responses focus on detection and enforcement, but the real issue lies in the underlying infrastructure, particularly identity. A growing movement advocates for individual control over personal data, rather than relying on banks, tech platforms, or governments. The existing model, which requires individuals to surrender control of their identity and data, is inefficient and prone to misuse.
Two major policy debates in Washington reflect this tension: reducing fraud and improving control over consumer financial data. However, policymakers are largely working within the constraints of the current system, pursuing incremental privacy improvements while expanding access to sensitive government data. The core challenge is enabling trusted verification and privacy while preserving individual control over personal data. States, as primary issuers of identity, are well-positioned to lead the next phase of digital identity infrastructure.
Utah's Digital Identity Bill of Rights is a notable example, placing individuals at the center of how their identity is used and shared. By shifting to privacy-preserving, user-controlled credentials, states can reduce fraud, improve transparency, and strengthen accountability. As federal debates continue, 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. The future of digital finance will depend on whether systems uphold both trust and rights, with identity serving as the bridge between the two.