Decentral identity – secure, compliant, and privacy-preserving ID
Digital identity systems are at a crossroads. Traditional centralized identity databases expose sensitive personal data to breaches, misuse, and surveillance.
Decentral identity offers a new model — one where individuals control their verified credentials while institutions retain the ability to validate them without direct access to the raw data.
This approach combines cryptography, data governance, and regulatory compliance to solve one of finance’s toughest problems: how to verify identity without compromising privacy.
Partisia’s work in privacy-preserving computation makes decentral identity not just possible, but practical — delivering trust without centralization.
This approach combines cryptography, data governance, and regulatory compliance to solve one of finance’s toughest problems: how to verify identity without compromising privacy.
Partisia’s work in privacy-preserving computation makes decentral identity not just possible, but practical — delivering trust without centralization.
How decentral identity works
Decentral identity replaces the central database with a distributed trust model. Instead of storing identities on a single server, user data is verified through cryptographic proofs and stored under the user’s control.
Institutions can verify authenticity through Zero-Knowledge Proofs (ZKP) or Multi-Party Computation (MPC) without seeing the underlying information.
A standard decentral identity system includes:
Institutions can verify authenticity through Zero-Knowledge Proofs (ZKP) or Multi-Party Computation (MPC) without seeing the underlying information.
A standard decentral identity system includes:
- Identity issuer: creates and signs the verified credential (such as a bank or government).
- Identity holder: controls their credential through a secure wallet or app.
- Verifier: checks authenticity through encrypted validation.
The verifier sees only proof — not the personal data itself.
This model directly supports GDPR’s data minimization principle and aligns with the EU’s upcoming European Digital Identity (EUDI) framework.
Related: See confidential computation for the cryptographic foundation behind secure identity systems.
This model directly supports GDPR’s data minimization principle and aligns with the EU’s upcoming European Digital Identity (EUDI) framework.
Related: See confidential computation for the cryptographic foundation behind secure identity systems.
Benefits for compliance and security
Financial institutions face ongoing pressure to balance security with privacy in Customer Due Diligence (CDD) and Know Your Customer (KYC) obligations.
Decentral identity directly addresses these requirements by reducing the exposure of personal data.
Key benefits include:
Decentral identity directly addresses these requirements by reducing the exposure of personal data.
Key benefits include:
- Regulatory alignment: meets FATF’s KYC and data privacy standards.
- Reduced identity theft: credentials can’t be stolen from a central database.
- Faster onboarding: users share verified proofs instead of documents.
- Cross-border interoperability: credentials remain verifiable across jurisdictions.
- Fraud prevention: verifications are cryptographically linked to verified sources.
Institutions using decentral identity can meet both AML compliance and consumer data protection requirements simultaneously — a dual challenge under regulations like DORA and GDPR.
Integration with digital ID verification and CIAM systems
Most financial and government systems today use Centralized Identity and Access Management (CIAM) tools, which create bottlenecks and single points of failure.
By integrating decentral identity principles, these systems can evolve into federated trust networks where verification is shared securely across participants.
This hybrid approach allows:
By integrating decentral identity principles, these systems can evolve into federated trust networks where verification is shared securely across participants.
This hybrid approach allows:
- Secure use of ID Verification (IDV) services that respect data privacy.
- Integration with Transaction Risk Scoring and Fraud Detection models without exposing identity data.
- Strong interoperability with Social Security Number (SSN) validators and existing national identity registries through privacy-preserving computation.
Decentral identity complements these systems — it doesn’t replace them. It adds a privacy layer that ensures compliance and user trust.
Related: See Financial Crime Detection for how identity integrity underpins all AML and fraud analysis.
Challenges and adoption readiness
Despite growing attention, decentral identity adoption faces hurdles:
- Interoperability issues: lack of global standards between identity frameworks.
- Regulatory uncertainty: uneven recognition of cryptographic proofs as valid identity evidence.
- User adoption barriers: limited awareness among consumers and service providers.
- Integration costs: legacy infrastructure not designed for distributed architectures.
The EBA’s 2025 Digital Identity Consultation and the EU EUDI Wallet Initiative are expected to accelerate standardization, paving the way for compliant, interoperable identity networks across the EU.
“Decentral identity solves the compliance paradox. It enables verification without visibility — a concept that regulators are beginning to accept as both lawful and secure.”
– Mark Medum Bundgaard, CPO, Partisia
This reflects a turning point where privacy technology becomes the foundation for regulatory trust.
Partisia’s perspective – advancing privacy-first decentral identity
Decentral identity requires collaboration between issuers, verifiers, and regulators — all without exposing personal data.
Partisia’s privacy-preserving data collaboration platform delivers that capability, making secure, compliant identity verification possible across sectors.
Using Multi-Party Computation (MPC) and Confidential Computing, institutions can:
Partisia’s privacy-preserving data collaboration platform delivers that capability, making secure, compliant identity verification possible across sectors.
Using Multi-Party Computation (MPC) and Confidential Computing, institutions can:
- Verify identities without accessing raw personal data.
- Link ID Verification (IDV) and Social Security Validators securely into decentralized workflows.
- Support Perpetual KYC (pKYC) by validating identity updates in real time.
- Enable cross-border identity collaboration under GDPR and FATF.
Partisia’s approach turns decentral identity into a working reality — one that builds trust through privacy, not despite it.
About Partisia
We are an innovative software company and a trusted partner empowering companies to compute on encrypted data. Providing a platform where data from individuals, governments and private companies are able to stay encrypted and protected, and still fully enabled. Partisia is founded by pioneers within Multi-Party Computation and advanced cryptography.
