Public blockchains make transactions transparent enough to be traced, audited and monitored, but this visibility can come at the expense of user privacy. Traditional compliance systems often address the issue of liability by identifying people, but this can undermine one of the original promises of crypto: the ability to transact without revealing one’s personal identity by default.
According to panelists at CoinDesk’s Miami Consensus conference earlier this week, these tensions can increasingly be resolved through an on-chain “intelligence layer” that combines a hybrid blockchain architecture with wallet address-level monitoring. The idea is to distribute the work between different parts of the system. Private permissioned networks can give institutions the accountability and credibility they need, while permissionless public chains can provide liquidity, and blockchain forensics tools can help platforms filter transactions at the wallet address level without automatically linking each user to a real identity.
Rajeev Bamra, global head of digital economy strategy at Moody’s Ratings, said the conventional intelligence layer answers three questions: “Who is it? What are they doing? And can I trust the records?” These problems have been solved in traditional finance by banks, custodians, clearing houses and rating agencies, he said.
Bamra estimates the institutional digital finance market at around $35 billion today, compared to more than $200 trillion in annual clearing flows for conventional finance, growing at “more than 100 or 150 percent” over the past 18 months. Blockchain architecture, he predicts, will not be uniformly public or private but hybrid. “Private permission networks are going to provide accountability and credibility,” he said, while “public permissionless networks provide the liquidity that private permissions don’t provide.”
Pauline Shangett, chief strategy officer of non-custodial exchange ChangeNOW, firmly sided with the user. “Bitcoin, at its core, was originally a semi-anonymous digital currency,” she said.
ChangeNOW, which does not enforce KYC by default, works with AML providers and blockchain forensics firms to monitor flows at the wallet address level. “All of this blockchain forensic infrastructure allows us to not map people who are transmitting funds through our system, but rather to map their addresses,” Shangett said.
When law enforcement uses ChangeNOW, Shangett said, the company provides transaction data without doxing the person behind the transaction. She said this compromise allows the platform to provide registration-free trading while maintaining internal accounting systems and working with authorities when illegitimate funds pass through the service.
On regulation, Bamra said cross-border frameworks such as the European Union’s Crypto-Asset Markets Regulation and the US GENIUS Act ask the same fundamental questions about asset quality, segregation and accountability, but diverge sharply at the specification level. “We believe there is regulatory convergence in intent, but fragmentation in reality or execution,” he said.
Shangett finished with a regulatory accountability framework, which she said gets to the heart of the question of where accountability should actually lie.
“The agents who should be held accountable for regulatory frameworks and their adoption are agents who deal with emissions, not transmission,” she said.
