Welcome to Crypto Long & Short, our institutional newsletter. This week, we explore the need for a state-led approach to digital identity. The estimated $5 trillion lost to fraud and improper payments in the US highlights the urgency of addressing the underlying issue of identity.
Current policy responses focus on detection and enforcement, but a more effective approach involves re-architecting our digital identity framework. A growing movement emphasizes individual control over personal data, rather than relying on banks, technology platforms, or governments.
The current 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 improper payments, and control of consumer financial data.
Policymakers are responding, but their efforts are largely constrained by the current system. The core challenge is enabling 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, serving as the primary issuers of identity and anchoring trust. Utah's Digital Identity Bill of Rights is a notable example, establishing clear principles for user control, data minimization, and verification. The goal is to modernize how trust is expressed, reducing reliance on centralized data and restoring individual control over identity and personal information. As federal debates continue, states have an opportunity to lead in a fundamentally different direction, one that upholds both trust and rights.