Tokenization Offers a Foundational Shift in How Identity Data Is Stored, Shared and Secured

Our current identity verification system is broken. Several incidents in the past year prove the danger of using outdated systems

Our current identity verification system is broken. Several incidents in the past year prove the danger of using outdated systems in which consumers are forced to repeatedly share the same core identifiers — like SSNs, birth dates and biometrics — across countless digital platforms.

In October 2023, a breach at 23andMe exposed genetic and ancestry data from nearly seven million users, including names, birth years and locations. Months later, hackers infiltrated Snowflake’s customer environments, compromising sensitive records from companies like AT&T and Ticketmaster. Then, in August 2024, National Public Data reported that 2.9 billion records had been stolen — nearly every American’s personal information, including Social Security numbers, now potentially in the hands of bad actors.

These incidents are symptoms of a more significant problem where the more our personal data circulates in its raw, reusable form, the more we risk, not just in financial loss but in privacy, trust and individual autonomy. Traditional cybersecurity approaches can’t keep up. We need a foundational shift in how identity data is stored, shared and secured.

Tokenization offers that shift.

Tokenizing PII as the Foundation of Digital Identity

Tokenization replaces sensitive information with secure, non-sensitive equivalents. Here’s how it works: Imagine you’re making an online purchase with your credit card. The retailer’s payment system, instead of storing your actual 16-digit card number, replaces it with a randomly generated token, such as “XJ84-KL92-PQ76”. This token has no intrinsic value and cannot be traced back to your actual card number if intercepted by hackers. When you complete the purchase, the token is securely mapped back to your real payment information by a trusted tokenization system, ensuring both security and seamless transaction processing.

The financial sector has already proved this works — Visa has issued over 10 billion tokens, reducing fraud by 60% and preventing hundreds of millions in losses. It’s time to apply the same model to personal identity.

Understanding Verified Trust Credentials

Verified trust credentials (VCs) are tamper-proof digital versions of physical ID attributes, such as biographic and biometric information, including foundational documents like driver’s licenses and passports. Cryptographically signed and secured, VCs can be validated instantly without lengthy manual checks or repeated exchanges of personal information between individuals and relying parties.

A reusable verifiable trust credential typically comprises three key components:

By tokenizing VCs, individuals can verify who they are without exposing unnecessary details and organizations can validate both the credentials and the trustworthiness of their source.

These credentials live in digital wallets, enabling users to control what they share and with whom, drastically reducing exposure while maintaining security.

A Privacy-First Digital Ecosystem

The tokenization of VCs marks a major evolution in how digital identity is managed. Imagine a future where educational degrees, licenses, background checks and IDs are stored in one secure wallet and shared only as needed.

This is already happening. Some universities issue degrees as verifiable credentials, allowing students to share their academic achievements instantly with employers or other institutions. Professional licenses, certifications and government IDs could follow.

In healthcare, tokenized credentials could revolutionize patient data sharing. Patients could grant secure, temporary access to records, keeping control while improving care coordination.

In the gig economy, workers could share tokenized background checks or verified skills, increasing trust between platforms, clients and workers.

Financial institutions could also benefit. Tokenized credentials streamline KYC and AML processes by allowing users to share just the required verified data points — like proof of address or income — without oversharing personal details.

The applications extend to age verification, borderless credential checks, and even secure online voting systems.

The Future of Digital Identity Verification and Screening

The internet was designed for open communication, not for secure identity. It lacks a built-in identity layer, so there’s no universal, standardized way to verify users across platforms. This gap has made PII vulnerable to breaches, fraud and misuse.

Traditional defenses can’t keep up. Tokenization fills that missing layer, giving individuals the power to verify identity and build trust online, without surrendering control of their private data.

This isn’t just a best practice — it’s a fundamental necessity in a world of rising cyberthreats, evolving regulations and AI-powered decision-making. If we want privacy, trust and resilience in our digital infrastructure, tokenization is no longer optional. It’s essential.