Regulatory approach to digital identity


Digital identity is seen as an integral enabler of the Internet of value. Over the past 5 years, digital methods have increasingly become the preferred means of transactions, that include payments, remittances etc. Statistics point out that in a traditionally cash friendly country such as India, digital transactions have exceeded the cash transactions in FY2015. Studies have analyzed positive impact of digital identity on GDP, tax and employment. A recent study by Boston Consulting Group points out that digital identity can bring governments across the globe up to $50billion in saving by 2020. This growing prevalence of digital identity brings along the need for regulatory measures to ensure that the information is handled responsibly by both private and public sectors.
While trust is a primary factor for digital identity to succeed, there exists a need to validate or ensure an identity claimed by individuals involved in a transaction. Several regulatory bodies have been initiated by countries across the globe to regulate this validation. In United States, National Strategy for Trusted Identities in Cyberspace (NSTIC) has taken up the initiative to create secure online identities for Americans. EU formed the eIDAS for the development of regulations on digital identity and UK started the Identity Assurance Program (IDAP) which is a government certification program to authorize private sector companies to act as digital identity providers.
Regulations and the initiatives started so far in this space are good for the adoption of digital identity. They cater to the two important reasons for the need to regulate, viz uncertainty and public good3. Public need to be assured that their identity is safe with the identity holder. They also need to be confident that, in their transaction with their peers, they have a valid and trustworthy digital identity to validate. Hence in my view, the regulatory initiatives so far address the primary concerns of the public.
However, the problem also arises when there is a need for cross border transactions. Paper identity has clear boundaries; like a driver’s license in your country being exclusive to your country. They are also regulated well by the government with valid background check. Digital identity on the other hand has loose boundaries in the Internet world. Also, different countries have different visions on what an identity is and how they can be regulated, albeit it all ultimately gets accessed globally. The challenge for the growth of a venture in Digital Identity will be due to the fact that there is no common consortium that can regulate identity globally.
Challenge also lies in the fact that banks continue to be the party responsible for the identity, albeit it being issued by the states and countries. Although there have been measures to create a private sector worldwide identity and authentication system (FIDO – Fast ID Online), the adoption has been slow.
Digital Identity is the key to the growth of digital economy and Internet of Value. A comprehensive regulation carefully crafted to avoid too-big-to-fail ventures, such as the passport systems regulated by ICAO (International Civil Aviation Organization) ICAO (International Civil Aviation Organization) can go a long way in enabling a paperless digital world in the future.

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