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Aadhaar logo seen displayed on a smartphone.

Avishek Das/SOPA Images/Sipa U via Reuters Connect

What We're Watching: Digital money experiences in India, Togo & El Salvador

The advent of digital IDs

In poor countries, many are born without birth certificates or identification, a problem that leaves them unable to participate in modern society because they can’t prove who they are. Those without papers can’t open bank accounts, and governments can’t track transactions conducted entirely in cash, meaning they can’t tax people they can’t find. In turn, this lost revenue makes it harder for countries to provide much-needed public services. Before Aadhaar, a biometric ID system issued in India, more than one billion people in that country, and the government in Delhi, faced this very challenge. The Aadhaar system uses thumbprints and iris scans to establish identities and bring people onto the grid. It provides a unique 12-digit number to every user and allows authorities to transfer funds for state pensions, fuel subsidies, and other government help directly into bank accounts created for people who’ve never had access to such things. In important ways, this system is a triumph in human development, but there is a potential downside: In a country where rule of law isn’t firmly entrenched, if a government can put money directly into your bank account, it can also withdraw it. That power could one day become a tool of coercion that political leaders in countries that use similar ID systems can use to enforce obedience from millions of people. There is also the risk of hacking and identity theft, a problem that can only be managed gradually as problems emerge. These are risks we’ll see in many developing countries in the coming years.

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