Welcome to Crypto Long & Short, our weekly institutional newsletter. This week, we examine the need for a state-led approach to digital identity.
Tricia Gallagher, founder of Treasury Solutions Info Tech, discusses how the current system's flaws can be addressed by giving individuals control over their personal data. The US has lost an estimated $5 trillion to fraud, highlighting the need for a new approach. A growing movement advocates for individual control over identity and data, rather than relying on banks, tech platforms, or governments. The current model, which requires individuals to surrender control of their identity, 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 incremental and limited by the current system.
The core challenge is enabling trusted verification and privacy while preserving individual control. States can play a critical role by re-architecting digital identity infrastructure, shifting from centralized data silos to privacy-preserving, user-controlled credentials. Utah's Digital Identity Bill of Rights is a notable example, establishing principles for user control, data minimization, and verification. The goal is to modernize trust, reducing fraud and improving transparency.
As federal debates continue, states can lead in a fundamentally different direction, one that prioritizes individual control and upholds both trust and rights. Identity is the bridge between these two concepts.