Public blockchains make transactions transparent enough to track, audit, and audit, but that visibility can come at the expense of user privacy. Traditional compliance systems often focus on accountability by identifying people, but that can undermine one of crypto’s original promises: the ability to conduct transactions without exposing personal identity by default.
According to panelists at CoinDesk’s Consensus Miami conference earlier this week, these tensions can increasingly be resolved through an onchain “intelligence layer” that combines hybrid blockchain architecture with wallet address-level monitoring. The idea is to distribute the work across different parts of the system. Private permissioned networks can give institutions the accountability and credibility they need, while public permissionless chains can provide liquidity, and blockchain forensic tools can help platforms screen transactions at the wallet address level without automatically tying 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 record?” These are addressed in the traditional financial world by banks, custodians, clearinghouses and credit rating agencies, he said.
Bamra estimated the institutional digital finance market today to be around $35 billion, versus more than $200 trillion in annual clearinghouse flows in conventional finance, with growth of “more than 100 or 150%” in the past 18 months. Blockchain architecture, he predicted, will not be uniformly public or private, but a hybrid. “Private permissioned networks will provide the accountability and credibility aspect,” he said, while “the public permissionless ones bring with them the liquidity that the private permissionless ones do not provide.”
Pauline Shangett, chief strategy officer at non-custodial exchange ChangeNOW, strongly backed the user-side argument. “Bitcoin was at its core a semi-anonymous digital cash,” she said.
ChangeNOW, which does not enforce KYC by default, works with AML providers and blockchain forensics companies to monitor flows at the wallet address level. “All this forensic infrastructure in blockchain allows us to not map people passing money through our system, but instead map their addresses,” Shangett said.
When law enforcement agencies come to ChangeNOW, Shangett says, the company provides transaction data without misleading the person behind the transaction. She said the compromise allows the platform to offer registration-free swaps while still maintaining internal accounting systems and cooperating with authorities when illicit funds flow through the service.
On regulation, Bamra says cross-border frameworks such as the European Union’s Markets in Crypto-Assets Regulation and the US GENIUS Act ask the same fundamental questions about asset quality, segregation and liability, but vary widely at the specification layer. “We think there is regulatory convergence in terms of intent, but there is fragmentation in reality or in implementation,” he said.
Shangett ended with a framework for legal liability, in which she proposed cutting back on the core of where responsibility should actually lie.
“The agents who should be held accountable for the regulatory frameworks and their adoption are agents who deal with emissions and not transmission,” she said.