Liability Models for Scaling Digital Identity Ecosystems

Executive Overview

Reusable digital identity promises reduced friction, lower compliance costs, improved user experience, and interoperability across sectors and jurisdictions. Yet trust cannot scale where liability remains uncertain.

This paper introduces the liability model under the Moresburg Model building on the Business Architecture Blueprint.  This guide is for governing liability within decentralised digital identity ecosystems and presents a framework for converting distributed trust into manageable and insurable risk.

Governance and Liability Architecture

The paper examines how decentralised ecosystems can allocate responsibility across Identity Providers, Attribute Providers, Verifiers, Holders, Governance Authorities, Certification Bodies, and Scheme Operators.

Risk Classification Framework

The model identifies four categories of risk forming the basis for liability allocation:

• Credit Risk

• Legal Risk

• Fraud Risk

• Operational Risk

Regulatory Safe Harbour

The paper explores how National Trust Frameworks can create conditions under which regulated entities may rely upon certified digital identities without recreating underlying assurance processes.

Bounded Liability and Commercial Sustainability

Liability is treated not simply as legal protection, but as economic infrastructure enabling:

• Risk modelling

• Pricing

• Insurance

• Investment

• Participation

• Interoperability

Why This Paper Matters

Digital identity adoption will not ultimately be determined by whether systems can prove identity.

It will be determined by whether institutions can rely upon those proofs without assuming unmanageable uncertainty. Liability is therefore not peripheral to digital identity — it is the condition upon which scalable trust depends.

Intended Audience

This paper is written for:

• Regulators and policymakers

• Financial institutions and banks

• Trust framework authorities

• Digital identity programmes

• Scheme operators

• Standards bodies

• Digital market participants

• Governance and risk professionals