EU Blockchain Forum Recommends Digital Identity Systems

In its newest report, the EU Blockchain Forum (EUBF) noted that government bodies need to home in on two aspects of the blockchain to help the technology fully actualize: That is, the institutions need to have digital national currencies as well as systems for digital identity, The Next Web reported.

The organization said in its report, “digital identity is the fundamental building block and a key area for governments to focus on … another important building block … is having digital versions of national currencies on the blockchain, for example, through blockchain-based central bank digital currencies (CBDCs).”

But the report also noted that digital identities should come before the creation of institutional blockchains. In other words, the group sees the blockchain as a place where users have a “trusted” digital identity. Yet the group wants identity systems for the blockchain to be “self-sovereign” and managed by users. But the outlet said the report’s set of recommendations is not set in stone and merely “conjecture.”

The news comes as the International Monetary Fund (IMF) Head Christine Lagarde called on central banks in November to seriously think about creating digital currency to fill the gap left by the falling use of cash. Financial Times reported at the time that Lagarde believes central banks could help further financial inclusion and prevent cases in which “too much power could fall into the hands of a small number of outsized private payment providers.” By embracing cryptocurrencies, Lagarde said that central banks can supply money to the digital economy.

At the same time, however, Lagarde did note that the central banks would have to determine how to balance privacy with the necessity of preventing crime with cryptocurrency. Some central banks are considering crypto: Sweden’s Riksbank, the People’s Bank of China and the Bank of Canada are already reportedly mulling issuing digital tokens to the public.