By: Jonathan Rufrano, TDC Policy Director

Today, many identity checks still depend on outdated processes: uploading photos of physical IDs, collecting large amounts of personal information, or relying on fragmented third-party databases. Mobile driver’s licenses (mDLs) and other digital credentials offer a better path. They can allow people to prove who they are or specific facts about themselves without oversharing sensitive information.

NIST’s latest guidance focuses on how mDLs can help banks and other financial institutions verify identity. TDC strongly supports this work because digital identity can strengthen compliance, make cybersecurity more effective, and make it easier to protect consumer privacy.

Why It Matters

Digital ID is a compliance and security upgrade for financial institutions to verify customers more securely while reducing fraud, account takeover risks, and repeated collection of sensitive personal data. When implemented properly, mDLs can use cryptographic signatures, device-based presentation, and selective disclosure to confirm identity information with a high degree of confidence.

Here is why The Digital Chamber recently submitted comments to the National Institute of Standards and Technology’s (NIST) National Cybersecurity Center of Excellence on its mobile driver’s license guidance for financial institutions:

  • Better compliance: Financial institutions need reliable ways to meet Customer Identification Program, Know Your Customer, and Bank Secrecy Act requirements in digital environments.
  • Stronger cybersecurity: Digital credentials can reduce reliance on easily copied documents, passwords, and centralized stores of sensitive data.
  • More consumer privacy: People should not have to share more information than necessary. Digital ID can allow a person to prove a specific attribute, such as age or residency, without exposing an entire identity document.

This issue is urgent. As stablecoins, digital assets, fintech platforms, and mobile-first banking continue to grow in the traditional finance industry, identity systems must keep pace.

TDC’s View

TDC believes privacy-preserving digital identity should become a core part of the future compliance framework. NIST’s work offers technical guidance to help financial institutions understand how to safely use mDLs in real-world onboarding, authentication, and compliance workflows.

But financial institutions also need clear rules from Treasury and FinCEN confirming how digital identity tools can satisfy existing Bank Secrecy Act obligations. Without that clarity, many institutions may hesitate to adopt better technology, even when it improves security and compliance outcomes.

TDC’s response urges policymakers and regulators to recognize that digital ID can support the goals of existing financial crime rules while reducing unnecessary data collection. The right framework can help institutions verify customers, protect consumers, and reduce risk at the same time.

What’s Next

NIST should continue updating its guidance to reflect how digital identity tools work in practice. That includes mobile-only workflows, privacy-preserving verification, user-controlled credentials, and interoperability across identity standards. At the same time, FinCEN needs to provide clear, technology-neutral guidance explaining how financial institutions can use mDLs and other digital credentials to meet BSA and CIP requirements.

Digital identity is ready to play a larger role in financial services. Now, regulators must update the rules so institutions can use it with confidence.

If you have any questions, please reach out to policy@digitalchamber.org.