What is a legal entity identifier (lei)?
A Legal Entity Identifier (LEI) is a 20-character code comprising letters and numbers exclusive to a legal entity, such as a Fund or trust, a Limited Liability Company, or any organization. Because various entities may share the same or similar names, this code distinguishes one entity from another in a global database of entities that can be searched with numerical identifiers rather than names.
The purpose of an LEI is essentially a requirement for businesses that provide regulated financial services. A company's LEI verifies its legitimacy in aglobal database. However, the demand for a common identification increased once more as banking and capital markets turned digital. vLEI, therefore, the LEI registration requirement came into existence
What is a Verifiable Legal Entity Identifier?
A Verifiable Legal Entity Identifier (vLEI), a new type of digitalized organizational identity, was created to address the demand for automated legal entity authentication and verification.
Credentials include documentation such as a photo, driver’s license number, or business registration. While these forms of documentation can verify identity in person, it’s difficult to verify the authenticity of these traditional credentials digitally. So, verifiable credentials are enhanced in tamper-resistance and reliability through digital signature technology.
In essence, the vLEI is a verifiable credential related to the LEI that grants individuals the ability to sign on behalf of an organization associated with their LEI code. The new vLEI can be used as a signing tool for corporate digital identity and individuals with delegated signing authority rights.
Digital certificates are similar but they have not solved the problem of digital identity. The information contained within is often out-of date or unreliable, and there's always been an issue with revocation - meaning you can't trust that it'll be valid when needed most!
The vLEI is a cryptographically verifiable credential that streamlines traditional outdated onboarding/identity related KYC processes and ultimately builds trust while reducting friction and wasted resources.
The vLEI system is revolutionizing the way that businesses, governments and financial institutions identify themselves, their ownership structures as well as authorized representatives for both.
Recently, GLEIF signed their first document (the GLEIF 2021 Annual Report) using a vLEI signature, and have been working closely with a healthcare company called ParmaLedger to pilot the vLEI in a live workplace scenario which you can read about in our previous blog.
HOW DOES THE VLEI WORK?
The vLEI is a digitized version of the LEI number which allows automated identity verification between counterparties based on the W3C specification. The framework supports any existing and future self-sovereign identity (SSI) platforms, whether blockchain/distributed ledger based or otherwise.
The vLEI was built with the KERI (Key Event Receipt Infrastructure) protocol in order to serve as a network of networks with GLEIF acting as the root of trust in a chain of verificable credentials authenticating the user and their legal entity. GLEIF states that the global LEI system is the foundation on which we can create the chain of trust for organizational identity and individuals within that organisation.
The vLEI is future proofed and is integrable with blockchains and decentralised systems, SSI and along with other decentralized key management platforms. GLEIF have stated that the vLEI can connect to any blockchain or distributed ledger technology, SSI network or cloud infrastructure Without the need for custom implementation or costs.
“vLEIs will be made hostable on both ledgers and cloud infrastructure supporting both the decentralization of ledgers plus the control and performance of cloud. Portability will enable GLEIF’s vLEI ecosystem to unify all ledger-based ecosystems that support the vLEI.” GLEIF
A vLEI is the functional, digital counterpart to a traditional LEI. In other words, it is a 20-digit LEI code that is digitally reliable and automatically checked without human involvement.
Since trust is the cornerstone of business, establishing it online is essential if you want to succeed in the global, digital economy. This level of safety entails possessing a credential that goes without question. Thus, digital identity companies should begin planning how to implement the vLEI into their business models and the customer lifecycle now.
LEI Worldwide are available and open to discussion with organisations who are planning to utilize the vLEI and may benefit from its use cases.