South Korea aims to promote economic development through digital identity on the blockchain.

The government will allow smartphones to replace existing IDs. South Korea believes that the economic value of digital IDs is about 3% of GDP.

South Korea plans to provide citizens with digital identities secured by blockchain, as it leverages the world’s most technologically sophisticated population to boost economic growth. The ID embedded in smartphones is one of the latest emerging technologies to support the digital economy, which has expanded as more people work from home, make cashless payments, and explore the metaverse. Digital IDs simplify online verification, eliminating the need to photograph certificates or authentication codes sent via text message. Instead, activities such as applying for national welfare, transferring money, and even voting can be completed with a single click or fingerprint.

Economist Hwang Seogwon from the Korea Institute for Science and Technology Policy said: “Digital IDs can generate huge economic benefits in finance, healthcare, taxation, transportation, and other fields, and may quickly become popular among the Korean population.” However, he added that more risk assessments must be conducted to ensure that the dangers do not outweigh the benefits.

The World Bank calls digital IDs a “game-changer,” and McKinsey & Company believes they could increase a country’s GDP by 13% and reduce business costs by trillions of dollars. McKinsey’s estimates are based on the widespread use of digital IDs, saving time on administrative work, reducing wage fraud, expanding consumer credit, promoting trade, and creating new markets.

Suh Bo Ram, head of the Korean Digital Government Agency, said: “Every service that has not yet fully transitioned online can now be done.” He said that South Korea could gain at least 60 trillion won ($42 billion) in economic value, or 3% of GDP, within a decade.

South Koreans’ enthusiasm for early adoption may also help. According to the Washington-based think tank Portulans Institute, they rank first in the world in terms of enthusiasm and ability to apply technology in daily life, business, and government.

South Koreans currently rely on resident registration cards (similar to the US Social Security card) to identify themselves. Under the proposal, an app will embed these IDs into mobile devices. South Korea will launch digital IDs in 2024 and aims to have 45 million citizens adopt them within two years. This goal may be hindered as everyone needs to visit a municipal office and pay a fee to update their registration card.

Suh acknowledged these concerns but said he believes the obstacles will be negligible compared to the benefits. He said the government is also aware of “Big Brother” concerns, referring to George Orwell’s 1949 novel.

Under the plan, the government will not have access to information stored on individual phones, including details of whose digital ID is used, how it is used, and where it is used, as the system will fully rely on decentralized identities, an advanced branch of blockchain technology.

Blockchain, known as the engine behind Bitcoin, refers to a digital ledger of data verified by devices on the network when updated. Hackers would have to break into each individual device to manipulate the data, and the chances of theft would be reduced as there is no central server to store information.

Heather Vescent, president of IDPro (Digital Identity Professionals Association) based in Oregon, said: “South Korea is becoming a quiet force showcasing the future of global technology.”

Other governments have also recognized the benefits of digital IDs. In Estonia, most of its eligible 1.3 million people have a digital ID to vote, pay bills, and sign documents. The government allows smartphones for verification if a special SIM card is attached. Germany also has a similar chip-based program.

According to proponents, other benefits of digital IDs include:

• Facilitating online medical services without the need to see a doctor in person
• Entering hotel rooms by scanning a smartphone at a self-service terminal
• Preventing the forgery and theft of IDs
• Remotely approving contracts without the need for signatures
• Strengthening fast boarding procedures at airports

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