From Wall Street to Web3: How the Gramm–Leach–Bliley Act Could Rein in Crypto

Everything starts with transparency and privacy. The GLBA’s Financial Privacy Rule mandates that any financial institution collecting nonpublic personal information must disclose what data is collected, how it is shared, and enable users to opt out of disclosures to non-affiliated third parties. These disclosures become annual touchpoints that empower consumers and pressure institutions to be accountable. Now, compare that to crypto platforms, exchanges, wallets, and DeFi apps, where data collection is often opaque, notices are buried in terms of service, and opting out isn’t an option. Crypto users routinely submit identity documents, transaction histories, IP logs, behavioral analytics, and more. A GLBA-style mandate would require those platforms to provide standardized privacy notices at onboarding and annually, with clear descriptions of third-party data sharing.

Shifting to security, the Safeguards Rule under GLBA compels institutions to develop written information-security programs tailored to the sensitivity of data and organizational complexity. As of 2023, the rule explicitly demands multi‑factor authentication, encryption of data in transit and at rest, regular risk assessments, designated security oversight personnel, incident response planning, vendor management, penetration testing, and breach notification to regulators and consumers within 30 days for exposures affecting over 500 individuals. Crypto, by contrast, sees frequent hacks, rug‑pulls, and cyber breaches. Enforcement akin to GLBA would force crypto platforms to formalize security frameworks, complete with accountability, audits, consumer disclosures, and regulatory escalation features, shifting the ecosystem away from reactive scrambles toward proactive resilience.

Fraud protection completes GLBA’s triad. The Pretexting Rule prohibits deceptive access to financial information via impersonation or pretenses. In Crypto, where specious token launches, fictitious audit claims, fake leadership credentials, and elaborate phishing schemes flourish, a similar anti-pretexting law could bring legal consequences to those misrepresenting identity or token legitimacy. In February 2024, a federal court upheld broader FTC authority under GLBA’s pretexting provisions, reinforcing the power to penalize any misrepresentation combined with data collection. Extending that power to Crypto could crack down on misleading token listings or impersonations used to elicit wallet funds.

But GLBA’s influence doesn’t end there. Its repeal of Glass–Steagall allowed financial giants to become conglomerates, yet it layered on consolidated oversight. Institutions could now offer banking, securities, and insurance services, but only under unified supervision and standards. Crypto entities frequently operate through networks of affiliated companies, custody arms, token issuers, bridge services, DeFi faucets, sometimes across jurisdictions. Borrowing GLBA’s group-level accountability could require transparency about affiliates’ capital, shared risk exposures, inter-entity transactions, and contingency protocols. That kind of structure, combined with enforcement across U.S. agencies and international coordination, would help prevent collapses like FTX from ricocheting across unregulated subsidiaries.

CBTC’s Commissioner Romero recently emphasized the need for exchanges and brokers to maintain "accurate books and records, cash management systems, and effective internal controls" to regain trust. That mirrors GLBA’s insistence on robust governance and accountability. At the same time, new laws like the proposed Digital Commodities Consumer Protection Act aim to streamline oversight but focus heavily on derivatives trading (Wikipedia). GLBA brings disciplines that apply directly to consumer privacy, cybersecurity, and fraud, areas still under-addressed in the crypto debate.

Across the pond, the EU’s MiCA regulation, effective since December 2024, offers a licensing scheme covering stablecoins, consumer protection, environmental impact disclosures, and anti-money laundering. Yet, MiCA doesn’t deeply tackle data privacy or fraud via false representation. Embedding GLBA-style privacy, safeguards, and anti-pretexting rules into MiCA could create a more holistic system that balances financial innovation with consumer safety and trust.

Imagine practical effects. A crypto exchange must provide a yearly “Privacy Notice” summarizing identity and behavioral data flows, showing all third-party integrations, and giving users an opt-out path for non-essential sharing. A lending protocol must publish its “Security Program,” with named personnel, risk assessments, encryption standards, and consumer alert mechanisms. Token issuers face civil liability if they claim third-party audits that don’t exist or misrepresent key team members. Holding‑company style groups must disclose aggregate risk exposures, intra-group asset transfers, and capital buffers. And if a breach or fraud impacts over a set threshold, users and regulators are notified publicly within a month.

This transformation would reshape Crypto from the Wild West to a next‐gen financial infrastructure. Innovation thrives on reliability and trust, something the GLBA ecosystem has evolved over two decades. By transplanting its DNA into digital asset regulation, we embed discipline without killing creativity. Privacy rules bring transparency; safeguard mandates fortify infrastructure; fraud prohibitions deter deception; affiliate oversight prevents contagion. Together, they offer a credible path to maturity for a market riddled with volatility and opacity.

Crypto platforms could even use cryptographic tools, zero-knowledge proofs, and selective disclosure to implement GLBA-style requirements while preserving user confidentiality. Tailoring compliance technology to give regulators and users assurances without revealing private keys or transaction history enhances both privacy and trust.

As FTX’s collapse underscored with unmatched clarity, lax controls and inadequate oversight can trigger instant fallout. Institutions in Crypto must evolve from loosely governed protocols to accountable financial entities. The GLBA, updated and adapted, offers not an antiquated relic, but a tested blueprint for balanced modernization of finance, one that harmonizes innovation with protection, disclosure with autonomy, and agility with accountability.