LEI Foundation Pilots Blockchain-Based Credentials Solution

The Global Legal Entity Identifier Foundation (GLEIF) and Evernym, a portable credential technology firm, have partnered to pilot a blockchain-based solution that allows companies to create and maintain digital wallets. These wallets store credentials that confirm the identity of a company and its employees, and can be used by financial firms to validate digital business transactions and perform activities like client onboarding and submitting regulatory filings.

GLEIF says a blockchain-based chain of trust secures these “organization wallets” and the verifiable credentials they contain, which connect an individual’s name and job role to the Legal Entity Identifier (LEI) of the organization they work for.

“The credentials themselves are not stored on the blockchain, they are just anchored on the blockchain. So the credentials are independent. That means that no personal information is stored on the blockchain,” said Christoph Schneider, head of IT and operations at GLEIF, speaking during a webinar held by GLEIF and Evernym on May 19.

GLEIF is the global body that oversees the issuance of the LEI, an alphanumeric code that is used within financial services to represent legal entities. The LEI codes are issued to legal entities by issuing authorities called Local Operating Units (LOUs).

Evernym, founded in 2013, created the Sovrin Network, a public distributed ledger that runs on an open source blockchain framework called Hyperledger Indy, built to allow people and organizations to control their digital identities.

The recently completed pilot simulated a regulatory filing, and was secured by a verifiable credential on the Sovrin Network. For the solution, GLEIF first registers its own identifier on the Sovrin ledger. GLEIF’s LOUs are accredited to issue verifiable credentials to legal entities, along with their LEIs. The legal entity can then issue verifiable credentials to its employees, linking their roles to the company’s LEI code, and then these credentials are stored in the entity’s organization wallet. This is known as a “chain of trust.”

In the simulation, the hypothetical regulator could verify the authenticity of the firm’s regulatory filings based on this chain of trust.

Allan Grody, president at consultancy Financial InterGroup Advisors, says the pilot is a far cry from the LEI’s original intent of identifying all financial market participants in the financial supply chain, and demonstrated that LEI can be cleverly applied to new use cases.

“It’s a very clever way of exposing the LEI to other use cases. It is a bold step to position the LEI as the leading organizationally defining code in all manner of businesses,” he says.

Grody says the solution could result in legal entities registering more LEIs, as the LEI initiative has been criticized for failing to achieve critical mass of registrants.

“I think it’s motivating to see use cases of the LEI in trusted blockchain applications. However, I would suggest that the financial industry and the regulators represented in the global government and industry data standards partnership focus the GLEIF and the LOUs on its own trusted blockchain application,” Grody says.

Beyond Finance

GLEIF and Evernym say the organizational wallets could be useful not only for financial services firms, but also in healthcare, during the Covid-19 pandemic.

“There’s been tremendous interest in the use of digital credentials for fighting Covid-19 and helping to reopen the economy,” said Drummond Reed, chief trust officer at Evernym, during the May 19 webinar.

“At some point, we’re going to have a vaccine. Having a credential that you have been vaccinated, from the authority that issued the vaccination, is going to be very useful and harder to spoof,” Reed said.