On May 4th, the “national standards strategy” for “critical and emerging” technologies such as blockchain and digital ID was released by the United States President Joe Biden’s administration. As per the strategy, the U.S. would focus on standards development in eight areas, including “digital identity infrastructure and distributed ledger technologies” that have a growing impact on various significant economic sectors.
Blockchain is often referred to as “distributed ledger.” As per a document from the National Institute of Standards and Technology (NIST) that is currently being reviewed, digital identity is defined as “the distinct representation of a subject participating in an online transaction.” The document also mentioned that digital identity is unique within the context of a digital service, but it may not be essential to uniquely identify the subject in all scenarios.
NIST is a federal agency that oversees government standards-related activities.
As regulators and enforcement agencies demand increased Anti-Money Laundering (AML) compliance in the crypto industry, blockchain solutions are being actively developed for Know Your Customer (KYC) processes. An apparent application of digital identity in economic sectors is in the KYC and AML processes. Proposals have been put forward utilizing blockchain’s consensus mechanism for implementing zero-knowledge Know Your Customer (KYC) verification, AML verification, and credit scoring. Additionally, off-chain identity accessibility has been made possible through passporting techniques that use soulbound non-fungible tokens (NFTs).
The government and crypto industry have not yet come to an agreement on privacy concerns that are closely related to digital identity.
The White House stated that the national standards strategy’s objective is to safeguard U.S. consumers and maintain the nation’s position in shaping global standards. The strategy includes enhancing investments in “pre-standardization” in the identified crucial areas, encouraging private sector and academic involvement in that research, focusing on training and guaranteeing integrity and inclusivity.
The Treasury Department’s office of financial research is leading the government’s efforts on digital identity, digital assets, and distributed ledger technology across federal and international agencies.