Public blockchains make transactions transparent enough to track, audit, and monitor, but that visibility can come at the expense of user privacy. Traditional compliance systems often address accountability by identifying individuals, but that can undermine one of the original promises of cryptocurrencies: the ability to transact without exposing personal identity by default.
According to panelists at CoinDesk’s Consensus Miami conference earlier this week, those tensions can increasingly be resolved through an on-chain “intelligence layer” that combines blockchain’s hybrid architecture with wallet address-level monitoring. The idea is to divide the work between different parts of the system. Permissioned private 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-world 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?” Those problems have been addressed in traditional finance by banks, custodians, clearinghouses and credit rating agencies, he said.
Bamra estimated the institutional digital finance market at about $35 billion today, 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. The blockchain architecture, he predicted, will not be uniformly public or private but hybrid. “Private permit networks are going to offer the aspect of accountability and credibility,” he said, while “public permits provide the liquidity that private permits do not.”
Pauline Shangett, chief strategy officer at non-custodial exchange ChangeNOW, came firmly on the side of the user argument. “Bitcoin at its core, at its origin, was semi-anonymous digital cash,” he 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 of this blockchain forensic infrastructure allows us to not map the people who pass funds through our system, but to map their addresses,” Shangett said.
When law enforcement agencies turn to ChangeNOW, Shangett said, the company provides transaction data without misleading the person behind the transaction. He said that commitment allows the platform to offer registration-free trades while maintaining internal accounting systems and working with authorities when illegitimate funds move through the service.
On regulation, Bamra said cross-border frameworks like the European Union’s Cryptoasset Markets Regulation and the US GENIUS Act raise the same fundamental questions about asset quality, segregation and liability, but diverge sharply at the level of specifications. “We believe that there is regulatory convergence in intent, but there is fragmentation in reality or execution,” he said.
Shangett ended up with a regulatory accountability framework, which he suggested gets to the core of where accountability should actually lie.
“The agents who should be responsible for regulatory frameworks and their adoption are the agents who deal with emissions and not transmissions,” he stated.
