The verifiable LEI: Ushering a New Era of Digital Trust

As the ongoing digital transformation of the global economy continues gaining traction, businesses worldwide are confronting new challenges, including an unprecedented surge in digital crime. Projections suggest that, let alone cybercrime costs could potentially reach a staggering $1.82 trillion by 2028. With over a decade of expertise in identity management, the Global Legal Entity Identifier Foundation (GLEIF) is uniquely positioned to enhance trust and transparency in digital ecosystems through its pioneering verifiable organizational identity solution—the verifiable Legal Entity Identifier (vLEI).

Creating a Secure Digital Environment

As digital transformation accelerates, unprecedented risks and challenges continue to emerge, while the pressing need for efficiently establishing trust remains largely unmet. According to the latest NASDAQ Global Financial Crime Report, an estimated US$3.1 trillion in illicit funds flowed through the global financial system in 2023, fueling illegal activities such as drug trafficking, human trafficking, and terrorist financing.

Envisioned as a new form of verifiable organizational identity, GLEIF’s vLEI meets the global demand for decentralized, automated authentication and verification of legal entities across industries. The vLEI combines an organization’s identity, represented by the LEI, and the official or functional role an individual plays for that organization, enabling more transparent and trusted digital interactions.

Based on the concept of self-sovereign identity (SSI), the vLEI unlocks the implementation of new applications and solutions across industries by leveraging its unique capabilities in three key areas:

·       Digital Signing: Legal entities and their authorized representatives can digitally sign legal documents. For example, financial institution representatives can streamline the reporting documentation submission.

·       Authentication: The validity of the vLEI can be automatically and cryptographically verified eliminating the need for human intervention. This enables financial entities and business partners to authenticate their counterparties in a transparent and trusted manner.

·       Permissioning: With the vLEI, organizations are equipped with a future-proofed tool to grant digitally verifiable authority to their representatives, allowing them to access a system or perform specific actions within a defined timeframe. For example, supervisory authorities can use this functionality to bolster trust in digitally submitted prudential information.

Paving the Way for Global Mass Adoption

As identity-related challenges grow more prevalent, the vLEI ecosystem is rapidly gaining traction among a global community of stakeholders. Following the official standardization of the vLEI in October 2024 – marked by the publication of ISO 17442-3:2024 – a growing number of organizations worldwide are entering the Qualification Program to become Qualified vLEI Issuers (QVIs), enabling them to issue vLEIs to legal entities.

The current network of QVIs spans three continents—North America, Europe, and, more recently, Asia—with the China Financial Certification Authority (CFCA) as the latest addition. Additionally, more than ten organizations are currently undergoing the qualification process and are expected to become operational in the coming months.

Furthermore, the establishment of the cross-industry vLEI Technical Advisory Board will provide technical, governance, and developmental support for this rapidly expanding ecosystem. More recently, the appointment of Ivan Mortimer-Schutts as Global Head of vLEI has spurred efforts to forge strategic partnerships to further enhance the vLEI’s global visibility and relevance. These efforts will help solidify the vLEI ecosystem as a future-proofed digital public infrastructure.

 

A State-of-the-art Tool Underpinned by the Global LEI System

Established by the Financial Stability Board (FSB) following the 2008 global financial crisis, the Global Legal Entity Identifier Foundation (GLEIF) is a supranational, not-for-profit organization that safeguards the Global LEI System, the world’s only regulatory-mandated identity management system for legal entities worldwide.

Powered by the Legal Entity Identifier (LEI)—a 20-character alphanumeric code defined by the ISO 17442 standard developed by the International Organization for Standardization (ISO)—this system has transformed how legal entities are identified and tracked globally, providing a robust, standardized framework for uniquely identifying them. As the secure digital counterpart of the LEI, the vLEI represents the ongoing evolution of this system in an era of rapid digital transformation.

With over 2.6 million LEIs issued, many legal entities worldwide rely on the Global LEI System to identify themselves in various business transactions. Due to its public good and industry-agnostic nature, the LEI—now complemented by the vLEI—is being adopted beyond its original use case in the derivatives market and regulatory compliance. This includes a wide range of novel applications in payments, supply chains, ESG, Web 3.0, and more, which also play a vital role in strengthening trust and transparency.