The Global Legal Entity Identifier Foundation (GLEIF) has published its planned verifiable LEI (vLEI) Ecosystem Governance Framework and is working with capital markets regulators on how the vLEI could be a means of securing filings and reports. It has also presented the framework for review by the Regulatory Oversight Committee (ROC) of the LEI, which includes more than 65 financial markets regulators and responded positively to the potential of the vLEI.
The vLEI framework has been a year in the making and complements existing LEI governance. It is based on standards and recommendations from the Trust Over IP Foundation (ToIP), which is hosted by the Linux Foundation, and is designed to provide a standardised and decentralised ecosystem that supports digital identities for all legal entities globally. Stephan Wolf, CEO of the GLEIF, says: “GLEIF’s vision is that every legal entity should have one global identity, and this should include a digital identity. Establishing the vLEI Ecosystem Governance Framework is a significant step towards realising the vision.”
From a capital markets perspective, Wolf explains that while uploads to regulators now use security elements such as passwords and two factor identification, the content of the upload itself cannot be sealed. The vLEI resolves the problem by wrapping LEIs in verifiable credentials that create a digitally trustworthy version of the LEI that can be used to automate verification of legal entities and their authorised representatives, without the need for human intervention.
Noting that the time is right to introduce the vLEI on the basis of broad digital transformation and growth in the global digital economy, Wolf acknowledges that firms are unlikely to change legacy systems to support the vLEI, but can make it applicable by piggy backing on market movements such as transformation and the ongoing development of APIs and systems interoperability.
Potential use cases of the vLEI include submitting regulatory filings and reports, customer onboarding, approving business transactions and contracts, and securing supply chains. The GLEIF is working on a showcase use of the vLEI that will see the digital identifier being used by multiple business executives and auditors to sign off annual reports.
“The LEI has a critical role to play in today’s digital world through its ability to provide organisations with unique, permanent identification globally,” says Wolf. “This is especially important in the context of identifying legal entities involved in digital transactions, where manual background checks inflate costs and cause unnecessary delays.” Examples here include customer onboarding and Anti-Money Laundering (AML) processes that often include the LEI but still need background checking to verify entities.
John Jordan, executive director of the Trust over IP Foundation, says: “The vLEI is a great, early-stage example of how the potential of the ToIP stack can be realised to digitally enhance an already established global system. It shows how a secure, interoperable, and scalable decentralised trust layer can enable an existing service to get ahead of issues relating to authentication and verification.”
The vLEI Ecosystem Governance Framework provides details on the governance structures and processes that will shape the development of the vLEI issuance ecosystem together with the services that GLEIF will provide, including a vLEI Issuer Qualification Program, essential key and credential management services, and a communications platform for information sharing between GLEIF and its network of vLEI issuers.
Wolf concludes: “We are trying to establish a global ecosystem of digital identifiers. This year we will look at apps for the vLEI in multiple domains including finance. The framework is open and open source, so anyone can build apps against it. We hope to see this happen through 2023 and 2024, and will provide support for all on the journey.”
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