The founding principles of blockchain centered on being “trustless”: a system in which cryptography and consensus replaced intermediaries, regulators, and centralized control.
While this framework resonated in crypto-native circles, it raised alarms elsewhere.
Trust is the fundamental force that underpins monetary movements, global trade and the broader financial economy. For financial institutions and market infrastructure providers, trust is not something to eliminate but to formalize, audit, govern and propagate.
But while early blockchain networks may have treated identity as an external concern, even privilege anonymity, discoveries in the December 2025 edition of the “Blockchain and digital assets Tracker® Series,” a collaboration between PYMNTS Intelligence and Citi, suggests that blockchain solutions are now designed with built-in identity, compliance and risk controls.
This change is not philosophical. It’s commercial. Without built-in security and identity controls, blockchain cannot move beyond experimentation in regulated markets. With them, it’s possible, enabling financial and blockchain payment solutions to operate within existing regulatory frameworks rather than outside of them.
The result is a new emerging class of networks that aim to preserve the efficiencies of distributed ledgers while meeting the standards required for systemically important financial infrastructure.
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Identity bottleneck
Security discussions around blockchain often focus on custody: how digital assets are stored, protected and insured. While custody remains essential, the report highlighted how blockchain’s institutional security and identity extends toward a broader concept of transactional and network security.
After all, for many institutions, the most difficult part of adopting blockchain is not integrating the technology itself but the approval process before even getting started. Risk committees, compliance teams, auditors and regulators all need to have confidence that new systems will not introduce unacceptable exposure. Networks that can demonstrate built-in compliance controls can shorten these conversations dramatically.
The reason? In traditional finance, identity is fundamental. Every account, transaction and counterparty relationship is anchored in Know Your Customer (KYC), Anti-Money Laundering (AML) and Sanctions Control processes. These controls are deeply embedded in institutional workflows, mandated by regulation and reinforced by risk management culture.
This is why, as the report reveals, this adoption this happens in narrow, high-trust use cases rather than radical transformations. Institutions start with applications where regulatory clarity is highest and operational gains are easiest to achieve. measure: internal cash flow, interbank settlements, collateral management and fund administration.
Read the report: Building the Blockchain Model: How Leading Financial Institutions Are Modernizing Money, Markets, and Trust
Cross-border payments and settlements remain a priority, particularly in wholesale contexts. Identity-aware networks reduce counterparty risk and compliance friction, making it easier to move value in all jurisdictions without counting on slowness, opaque correspondent banking chains.
However, integrating security and identity into blockchain networks is not without trade-offs. Confidentiality remains a central concern. Institutions must balance transparency for regulators with confidentiality for clients and counterparties. Techniques such as zero-knowledge proof and selective disclosure show promise, but they add complexity and remain unfamiliar to many risk management teams.
Interoperability is another challenge. As networks become more permissioned and specialized, the risk of fragmentation increases. The industry’s task is to ensure that identity and compliance frameworks can interoperate across networks, rather than locking participants into isolated ecosystems.
This development may not have the drama of previous cryptographic stories, but it is much more consequential. By aligning distributed ledger technology with the realities of regulation and risk management, the industry is laying the foundation for sustainable adoption. The report reveals that, rather than being a disruptive alternative to existing systems, institutional blockchain increasingly serves to facilitate a reliable trust infrastructure that integrates security, identity and compliance into value transfer mechanisms.
