The Digital Avatar on a Blockchain: E-Identity, Anonymity and Human Dignity

Abstract: In order to comply with specific regulations (eIDAS, Payment Services Directive, Anti-Money Laundering Directive) and reduce risk profiles, financial service providers increasingly collect large amounts of information from their customers. The increasing opportunities and technical means for data collection afforded from digitalisation raise legal concerns related to proportionality, necessity, and data minimization. However, the concerns go beyond just GDPR compliance and legislative balance, as distinct architectures and technological deployments potentially impact rights, freedoms, and ethics. This paper will address the issue by examining aspects of digital identity, especially those that have proposed the use of a permissioned distributed ledger or blockchain as architecture for know your customer and onboarding evidential frameworks, using specific hashing schemes that derive unique identifiers from the combination of specific personal data points. Evidence is appended to a data structure, for the purpose of auditing and/or record keeping, potentially ensuring an immutable record of events is maintained. After elaborating on the notion of identity in the digital sphere and the applicability of the GDPR to such a data structure, the discussion will be developed to critically assess the current trend towards using the financial institutions’ customers’ mobile devices as interfaces to the distributed data structure and the legal and sociological implications of this technological development. The potential impact of the analysis goes beyond digital identity within the finance sector, positioning the discussion towards approaches for e-governance and the regulation of digital identity in a way that human dignity is preserved and the risks of creating a ubiquitous "digital avatar" are adequately addressed by the law.