A recent Moody’s report on “Decentralized Finance and Digital Assets” highlights concerns about India’s large-scale digital identification program, noting that it frequently denies services to users. The report questions the reliability of biometric technology and raises privacy and security risks as well.
GS II: Polity and Governance
Dimensions of the Article:
- Key Highlights of Moody’s Report on Digital Identification Systems
- Government’s Response to Moody’s Report
- Challenges Associated with Decentralized ID Systems
Key Highlights of Moody’s Report on Digital Identification Systems:
Aadhaar and Worldline: Leading but Scrutinized Systems
- Aadhaar and Worldline recognized as prominent digital ID systems in terms of scale and innovation.
- Both systems have drawn scrutiny regarding privacy and security concerns.
Concerns About Aadhaar:
- Aadhaar’s centralized data storage raises the risk of data breaches.
- Adoption of Aadhaar for welfare program disbursement hampers effective implementation.
- Biometric hurdles, including authorization and reliability issues, hinder Aadhaar’s effectiveness.
- Aadhaar allows access to public and private services through fingerprint, iris scans, and OTPs.
- Administered by UIDAI, Aadhaar aims to enhance welfare access for marginalized groups.
Challenges and Service Denials:
- Service denials are common in the Aadhaar system.
- Biometric technology reliability is questionable, particularly in hot, humid climates.
- Moody’s advocates for decentralized ID systems, like blockchain-based digital wallets, for enhanced privacy control and reduced online fraud risks.
Government’s Response to Moody’s Report:
- The government highlighted international recognition and praise for Aadhaar from institutions like the IMF and the World Bank. Several countries have also sought to learn from the UIDAI’s Aadhaar system.
- The government clarified that Aadhaar seeding in the MGNREGS database doesn’t require worker biometric authentication.
- Payments to workers under the MGNREGS scheme are directly credited to their accounts without biometric authentication.
- In a centralized system, a single entity controls and manages a user’s identifying credentials and access to online resources.
- This managing entity can use the user’s identity data for profiling purposes.
- Decentralized ID (DID) systems, on the other hand, store personal data in the user’s digital wallet and verify identity on decentralized digital ledgers like blockchains.
- DID enhances privacy and reduces personal information held by intermediaries.
- Users manage their identity in portable digital wallets rather than relying on governments or entities.
Challenges Associated with Decentralized ID Systems:
- Digital IDs, whether centralized or decentralized, can reinforce group identities and political divides, especially if offered by influential tech and social media companies.
- Concentration of power within these entities could lead to control over individual identities, impacting digital interactions.
- Such concentration may further polarize group identities and political affiliations, undermining a united and diverse digital space.
- Aadhaar is a 12-digit individual identification number issued by UIDAI.
- It serves as proof of identity and address within India.
- The number is unique for each individual and remains valid for a lifetime.
Usage and Benefits:
- Aadhaar facilitates access to various services, including banking and mobile phone connections.
- It is accepted for both government and non-government services.
- Aadhaar establishes an individual’s identity through demographic and biometric data.
- Aadhaar is a voluntary service available to all residents, regardless of their existing documentation.
- It offers a convenient and widely recognized form of identification.
-Source: The Hindu