Public blockchains make transactions transparent enough to track, audit and police, but this visibility can come at the expense of users’ privacy. Traditional compliance systems often address accountability by identifying individuals, but this can undermine one of crypto’s original promises: the ability to transact without revealing personal identity by default.
According to panelists at CoinDesk’s Consensus Miami conference earlier this week, these tensions are increasingly being resolved through an “intelligence layer” on the chain that combines hybrid blockchain architecture with wallet address-level monitoring. The idea is to divide 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 forensics tools can help platforms screen transactions at the wallet address level without automatically tying 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?” These have been dealt with in traditional financing by banks, custodians, clearing houses and credit rating agencies, he said.
Bamra estimated the institutional digital finance market at around $35 billion today, against more than $200 trillion in annual clearinghouse flows in conventional finance, with growth of “over 100 or 150%” in the last 18 months. Blockchain architecture, he predicted, will not be uniformly public or private, but a hybrid. “Private permit networks will offer the accountability, the credibility aspect,” he said, while “the public permitless ones bring the liquidity that the private permits don’t.”
Pauline Shangett, Chief Strategy Officer at non-custodial exchange ChangeNOW, stuck to the user side’s argument. “Bitcoin at its core, at its origin was a semi-anonymous digital cash,” she said.
ChangeNOW, which does not enforce KYC by default, partners with AML providers and blockchain forensics firms to monitor flows at the wallet address level. “All this blockchain forensics infrastructure allows us to not map people sending money through our system, but instead map their addresses,” Shangitt said.
When law enforcement agencies come to ChangeNOW, Shangitt said, the company provides transaction data without doxing the person behind the transaction. She said the compromise allows the platform to offer registration-free swaps while still maintaining internal accounting systems and working with authorities when illegitimate funds move through the service.
In terms of regulation, Bamra said cross-border frameworks such as the EU’s Markets in Crypto-Assets Regulation and the US GENIUS Act pose the same fundamental questions of asset quality, segregation and liability, but differ sharply in the specification layer. “We think there is regulatory convergence in intent, but there is fragmentation in reality or execution,” he said.
Shangett concluded with a statutory liability framework that she suggested cut to the heart of where liability should actually lie.
“The agents who should be held responsible for the regulatory framework and its adoption are agents dealing with emission and not transmission,” she said.
