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US Government Prioritizes Standards Development for Digital Identity and Blockchain Technologies

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On May 4, the Biden administration in the United States released a national standards strategy for critical and emerging technologies, which highlighted eight areas for the development of prioritized standards. Among these are digital identity infrastructure and distributed ledger technologies, which are becoming increasingly important in a variety of economic sectors. Digital identity is defined as the unique representation of a subject engaged in an online transaction, whereas distributed ledger technology is a synonym for blockchain. The National Institute of Standards and Technology (NIST) is responsible for coordinating government standards activities and is currently reviewing documents on digital identity.

One use of digital identity in the economic sector is for Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance, where blockchain solutions are being actively developed to meet regulatory demands. Innovations such as zero-knowledge KYC verification based on the blockchain’s consensus mechanism have been proposed to carry out AML verification, credit scoring, and other similar functions. Techniques, such as passports using soulbound nonfungible tokens (NFTs), have also been deployed to make off-chain identities accessible. However, privacy concerns remain a major issue in the implementation of digital identity in these sectors, and there is no consensus between the government and the cryptocurrency industry.

The White House has stated that the goal of the strategy is to protect U.S. consumers and ensure the country’s role in developing international standards. The strategy includes investing in pre-standardization research, encouraging the private sector and academic participation in that research, investing in training, and ensuring integrity and inclusivity. The Treasury Department’s Office of Financial Research leads the government’s work on digital identity, digital assets, and distributed ledger technology in federal and international agencies.

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