Welcome to Crypto Long & Short, our weekly institutional newsletter featuring expert analysis and news for professional investors. This week, we delve into the pressing issue of digital deception and the need for a state-led approach to identity verification. According to Tricia Gallagher, founder of Treasury Solutions Info Tech, the estimated $5 trillion lost to fraud and improper payments in the United States is a stark reminder of the urgency for a new approach.
The current focus on detection, recovery, and enforcement is insufficient, as it fails to address the underlying issue of identity. Gallagher argues that the solution lies in a state-led, user-controlled digital identity framework that prioritizes individual control over personal data.
This approach is gaining momentum, with a growing movement emphasizing the importance of individual agency and control over identity and personal data. The existing system, which relies on broad, one-time consent frameworks, enables ongoing access and reuse of financial data with limited transparency, constraining innovation and economic growth. In contrast, a state-led approach would enable trusted verification and privacy while preserving individual control over access to personal data.
Utah's Digital Identity Bill of Rights, which takes effect in May 2026, serves as a model, establishing clear 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 an opportunity to lead in a fundamentally different direction, one that upholds both trust and rights in the digital economy.