Episode 5 of The Future of Finance is OPEN tackles a problem that sits underneath everything else we’ve discussed on this podcast. We can move money faster, cheaper, and across more borders than ever before. But none of it works if you can’t answer one deceptively simple question: who is on the other side? Our guest is Melodie Lamarque, VP of Identity and Compliance at Fireblocks. Her path to the problem started early. She wrote a paper on blockchain at MIT in 2015, advised by Christian Catalini, a previous guest on this show, and fell in love with the technology before most of the industry had noticed it. Then she did something unusual for a true believer: she went into traditional finance first, handling M&A in Paris and digital assets in New York at JPMorgan, before moving into venture capital in London. In 2022 she left to co-found the Keyring Network with Alex McFarlane, and last year she joined Fireblocks to take the same problem to institutional scale. I first met Melodie at the tail end of Sibos. While everyone else was drinking champagne and packing up to leave, the two of us sat in a corner for forty-five minutes going deep on identity. That conversation stayed with me. This episode is the continuation of it. The Tooling Was Never the Problem Melodie said something early in the conversation that reframes most of the last decade of crypto. We have built magnificent tools. Complex, genuinely impressive tools. The issue has never been the technology. It was regulation, or more precisely, the absence of clarity about what institutions were actually allowed to do. This explains the pattern she watched play out from the inside. Some institutions went the full DeFi route, touching everything with little regard for the rules. Others stayed away entirely. The middle path: regulated, secure, and still useful went unexplored not because it was technically impossible but because the risk of guessing wrong was too high. When the rules are unclear, the rational institution does nothing. That hesitation, not any missing piece of code, is what held the industry back. Solving for DeFi Without a Gatekeeper Keyring’s question was always the same: how do you verify the person or company behind a wallet address without writing that risk information onto a public blockchain for everyone to see? A startup can’t simply declare a new standard and expect the world to adopt it. So Melodie and Alex found a niche instead. They built a way for institutions to touch the riskiest part of the chain, DeFi, in a way that felt safe enough to actually try. The mechanism is worth understanding because it points at where this is all heading. Using zero-knowledge credentials together with a technology called ZK-TLS, a user can extract verifiable proof of identity from a source they’ve already been verified against their bank, their Coinbase account and package it into a cryptographic proof, and attach it to a non-custodial wallet. The result was one of the first scalable ways to build a permissioned pool in DeFi where participants could come from anywhere. No central gatekeeper needed to know where they were from. The institutions on the other side simply knew that everyone in the pool had been checked somewhere credible. Melodie is refreshingly honest about the limits of the technology that gave Keyring its early appeal. Zero-knowledge proofs created real FOMO among institutions, which benefited her startup. But she’ll happily tell you that for small-scale experimentation between trusted partners, the cryptographic magic adds almost nothing. The value of dissociating a real-world identity from a wallet address only shows up at scale, where a database of linked identities becomes a honeypot worth attacking. Fix the Boring Problem First The phrase that everyone reaches for is “the future of digital identity” agentic payments, self-sovereign credentials, the decentralised frontier. Melodie’s instinct is to slow that conversation down. There is a far less glamorous problem sitting in front of it that almost no one has solved: how do two parties simply identify each other and exchange information in order to move money? Today that is genuinely hard. If you’re a fintech or a new bank and your customer wants to send a transfer to the outside world, you have remarkably few tools to reliably know the counterparty and then communicate with them securely. Melodie’s view is that this plumbing, closer to how SWIFT works between custodians than to anything crypto-native, has to come first. The custodian on each side identifies the other, then passes down the information about the individual behind the transaction. It is unglamorous, and it is the foundation everything else depends on. I pushed on this because the gap she’s describing is real. The FIDO Alliance, passkeys, we are still mostly validating that this is the right device, not that this is the right person. We have built proxies for identity and started to believe they are identity. Getting down to the actual beneficial owner is the work that remains. Standardising the Handshake Editor’s note: We didn’t cover this on the episode, but it speaks so directly to Melodie’s point about solving the boring problem first that it belongs here. Fireblocks has since launched the Open Transaction Layer, or OTL, an open, permissionless protocol that takes aim at exactly the gap she described. OTL leaves settlement to the blockchains. It isn’t trying to be another chain or another network. Instead it standardises the handshake that has to happen around a transaction: proving who you are, exchanging the originator-and-beneficiary information the Travel Rule requires, verifying the counterparty, and negotiating trust before any money moves. This is the SWIFT-like messaging layer Melodie kept returning to, written for a world of wallets rather than a world of correspondent banks. The Travel Rule, for anyone outside compliance, is the regulation that obliges the two institutions in a transfer to pass each other identifying details about the sender and the recipient, the digital equivalent of the paperwork that has always travelled alongside a wire transfer. What makes OTL interesting is what it deliberately refuses to be. There is no central operator, no shared registry, and no pre-approved consortium deciding who’s allowed in. Personal data never sits in a central pool waiting to be breached; it travels only end-to-end encrypted, peer to peer, over what are called DIDComm channels—secure direct lines between two parties’ decentralised identifiers, so the information goes straight from one to the other and nowhere else. Anyone who controls an HTTPS domain can join, the same low bar as putting up a website. And crucially, each participant decides for itself whom to trust, rather than deferring to some network-wide authority that grants or revokes the right to transact. That last design choice is the one that matters most to me, and it echoes everything Melodie said about open standards. A network with a single gatekeeper is just the old walled garden wearing new clothes. A protocol where trust is decided at the edges, by the participants themselves, is the version that can actually scale to the merchants, creators, and individuals who have never been let into the room. It avoids the honeypot Melodie warned about, it puts the verification burden where it belongs, and it leaves the door open rather than locked. Whether OTL becomes the standard or simply moves the conversation forward, it is pointed at the right problem. The Arms Race, and Who Can Afford to Win It Identity verification is an arms race, and AI has made it faster and nastier. Fraud is getting better at exactly the rate that detection is trying to keep up. What struck me most in Melodie’s framing is that this is, at heart, a question of money. Doing identity properly is expensive. The largest, most sophisticated players: the big banks, the well-funded third-party providers, can pour resources into staying ahead. Smaller players cannot. Her conclusion has an uncomfortable logic to it. The compliance burden and liability may need to concentrate on the biggest institutions precisely because they’re the only ones who can afford to fight the fraud effectively, with smaller players relying on them through lighter, inherited requirements. We have the tools: biometrics, cryptographic signatures, time-bound tokens. However, tools alone don’t decide the outcome. The resources behind them do. The Inclusion Question I Couldn’t Let Go Of This is where I leaned on Melodie, because it’s the part I care about most. For years the financial inclusion community has argued for tiered KYC: simplified due diligence at the bottom, scaling up as transaction values grow. It gives access to people who can’t produce two forms of ID and a proof of address, while still offering some visibility into activity that is, in cash, completely invisible. The recent update to FATF’s Recommendation 16, in my reading, didn’t move us forward here. If anything it added burden, landing hardest on the small institutions and on the end users who never had the data being demanded of them. So I asked her directly how the gap actually closes for someone who has, say, a mobile money identity, one anchor, not the whole shebang. Her answer is where the optimism lives. For exactly these people, crypto can be genuinely helpful. Tiered requirements are the right model, and a digital footprint can become more than a check box: it can build a verifiable reputation, a portable credit history, a record of financial behaviour that someone with no formal banking trail has never been able to carry with them. These are the corridors where the technology can actually make a difference. A stablecoin payment between the US and Europe saves you very little. A verifiable identity and a credit history for someone the formal system has never seen can change the e
