Welcome to Crypto Long & Short, our institutional newsletter featuring expert insights, news, and analysis for professional investors. This week, Tricia Gallagher, founder of Treasury Solutions Info Tech, discusses the need for a state-led approach to digital identity. The United States has lost an estimated $5 trillion to fraud and improper payments, with most policy responses focusing on detection and enforcement rather than addressing the underlying issue of identity. Gallagher argues that identity and control over personal data belong to the individual, not banks, technology platforms, or the government.
The current model, which requires individuals to surrender control of their identity and personal data, is inefficient and expands the surface area for misuse and security breaches. Two major policy debates in Washington reflect this tension: reducing fraud and improper payments, and control of consumer financial data. However, policymakers are responding 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 access to personal data.
States have a critical role to play in leading the next phase of digital identity infrastructure, positioning themselves as the anchor of trust by re-architecting how trust is expressed. Utah provides a clear example, introducing a Digital Identity Bill of Rights that places individuals at the center of how their identity is used and shared. The goal is not to remove the state but to modernize how trust is expressed, reducing fraud, improving transparency, and strengthening 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 reduces reliance on centralized data and restores individual control over identity and personal information.