Welcome to Crypto Long & Short, our institutional newsletter featuring expert insights, news, and analysis for professional investors. This week, we delve into the critical issue of digital identity and the role of states in shaping its future. Tricia Gallagher, founder and principal of Treasury Solutions Info Tech, discusses how the current system's focus on detection and enforcement is inadequate, and why a state-led approach to digital identity is necessary to combat fraud and promote trust. The estimated $5 trillion lost to fraud and improper payments in the United States highlights the urgency of this issue.
Gallagher argues that the underlying problem lies in the infrastructure of digital identity, which is often controlled by banks, technology platforms, and governments, rather than individuals. This lack of control over personal data not only erodes individual agency but also hinders innovation, competition, and economic growth. The solution lies in a state-led approach that prioritizes user-controlled credentials, enabling individuals to direct how their data is shared and used. Utah's Digital Identity Bill of Rights, which takes effect in May 2026, serves as a model for this approach, establishing principles for user control, data minimization, and restricted surveillance.
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 the opportunity to lead in a fundamentally different direction, one that restores individual control over identity and personal information. The future of digital finance will be defined by whether systems uphold both trust and rights, with identity serving as the bridge between the two.