Recently, amid India’s extensive digital infrastructure development, the world’s largest digital identification program has been found to regularly deny services to users. This revelation was made in Moody’s report titled “Decentralized Finance and Digital Assets.” The report highlights the reliability issues of biometric technology and raises concerns about potential privacy and security risks.
Key Highlights of Moody’s Report
Moody’s report outlined several major points concerning privacy and security issues. Notably, it identified Aadhaar, which is administered by the Unique Identification Authority of India (UIDAI), and a new crypto-based digital identity token called Worldline. Despite their innovation, they have drawn scrutiny for privacy and security issues.
The concentration of sensitive information within specific entities by Aadhaar increases data breach risks. Furthermore, the usage of Aadhaar to route Direct Benefit Transfers to beneficiaries of welfare schemes, such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), impedes their effective implementation due to authentication issues and biometric reliability concerns.
Service Denials and Reliability of Biometric Technologies
The UIDAI aims to integrate marginalized groups and broaden welfare benefits access via Aadhaar. However, this large-scale system often results in service denials and questions arise concerning the reliability of biometric technologies, particularly for manual labourers in hot and humid climates.
Centralization Versus Decentralization of Data
Moody’s report recommends decentralized ID (DID) systems such as digital wallets. These DID systems are based on blockchain capabilities that allow users more control over private data and can reduce online fraud. In contrast, in centralized systems like Aadhaar, a single entity controls and manages a user’s data and their access to online resources.
Government’s Response to Moody’s Report
The government dismissed the report’s criticisms, arguing that international agencies, including the IMF and World Bank, have praised Aadhaar. Furthermore, several nations are in touch with UIDAI to understand how they can implement similar digital ID systems.
Pros and Cons of Decentralized Systems
While the adoption of DID increases privacy, it can have negative social repercussions. It may intensify group identities and political divides, especially if offered by technology and social media companies with significant monopolistic influence. The consolidation of control within these entities could lead to a concentration of power over individual identities, affecting perceptions and interactions in the digital realm.
Aadhaar: A Brief Overview
Aadhaar is a 12-digit individual identification number issued by UIDAI on behalf of the Government of India. It serves as proof of identity and address nationwide and remains valid for life. The Aadhaar system was designed to help residents avail various services provided by banks, mobile phone companies, and other government and non-government services.
Direct Benefit Transfers: An Insight
The Direct Benefit Transfer (DBT) initiative was launched by the Indian government on 1st January 2013 as a reform to the government delivery system. The main components of DBT include the Beneficiary Account Validation System and a robust payment and reconciliation platform integrated with various financial institutions.
