London Workshop Explores Blockchain Identity in Finance

The Identity & KYC conference in London hosted a workshop on using blockchain technology to improve know-your-customer processes earlier this week.

AccessTimeIconMay 29, 2016 at 3:56 p.m. UTC
Updated Sep 11, 2021 at 12:18 p.m. UTC
Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.
Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.
CoinDesk - Unknown

The Identity & KYC conference in London hosted a workshop on using blockchain technology to improve know-your-customer processes earlier this week.

Led by blockchain compliance consultant Siân Jones, the workshop was attended by a group drawn from banks, financial institutions, startups and regulators.

The group discussed several challenges faced by banks and financial institutions when it comes to identity, and whether or not the blockchain can help solve these problems. The overwhelming consensus was that even though the blockchain is very promising, it has many real-world limitations around identity.

The discussion was exploratory in nature, focusing on the needs of current financial industry participants and exploring the use of potential blockchain technologies.

KYC moving beyond simple identity

The group discussed the impact on the financial industry of the trend of moving away from simply looking at government-issued identity cards, like passports and driver's licenses. Attendees looked at exploring more holistic datasets around individual identity that involve everything from purchase history to utilities connections to assess an individual’s identity.

These third-party data points already provide an important source of identification information beyond simple identification systems and are becoming increasingly popular in the financial industry and elsewhere to supplement government-provided identification data. They are also more nebulous in nature, giving a 'probability score' for how strongly the algorithm believes the individual is who she says she is.

The trend is expected to accelerate in the future, with simple identification mechanisms becoming less important for financial institutions.

In such a world, an identity on the blockchain, like a tokenized version of a driver’s license, may not be sufficient for most businesses and financial institutions. Any blockchain solution will therefore need to gather information on the individual available via third-parties, a considerably harder problem for blockchains to solve.

Where blockchains fall short

There are many challenges faced by the financial industry involving identity, and some of the key issues are hard problems to solve. The initial on-boarding process, when the issuing of identity is first conducted by a government or financial body after verifying information about the individual, still remains a challenge.

This is especially true on a global level, where a significant portion of the developing world is without any form of government-issued identification.

The reliability of any identity, whether on the blockchain or outside, is only as good as the authority issuing that identity. An identity verified and issued by the UK government, for example, would likely be considered more reliable than one issued by a bank in Somalia.

Advantages of blockchain-based identity

There are several advantages of using blockchain-based identity, especially around the quick dissemination of information about an individual in a global context.

This is true when identity needs to be revoked and reissued, especially in the event that someone's identity is stolen. For example, if a passport gets stolen, the issuing country might replace it, but it takes much longer for a financial institution in another country to know about the status of this identity revocation. Blockchain allows this process to be quick and efficient.

In addition, blockchain-based identity systems have the possibility of selectively revealing information about an individual’s identity. This could help prevent identity theft and enhance end-user privacy.

There could also be efficiency gains by larger institutions around issuing blockchain identities, especially because a lot of verification processes today are repetitive.

Although not a current concern to the nascent Internet of Things industry, several institutions are looking into how digital identity will play out when identity is not restricted to individuals and legally defined entities but also includes physical things.

A blockchain seems like an efficient solution to handle such large-scale identities that need to be shared among multiple stakeholders.

Starting point

Although many financial institutions are exploring blockchain technology for identity solutions, most of the rules and regulations around KYC and identity for regulated financial companies revolve around government-issued identity as the preliminary requirement. Therefore, the use of blockchain for identity will need to start with a government body deciding that it would issue some form of identity on the blockchain.

There are many unsolved problems around this, from privacy to access. For example, even though an identity document like a passport is issued to the individual, it isn’t owned by the individual in a legal sense.

It is unclear how the identity data on a blockchain will be owned — whether the individual or the identity issuing body will ultimately own the identity and data around it.

As Jones put it:

"The fundamental challenge in identity is the intents of various participants are not aligned. Governments, businesses and individuals have conflicting interests."

Anonymous crowd image via Shutterstock


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to to register and buy your pass now.