The general concept of decentralisation in trade has led many people to think about power shifting from traditional financial institutions towards individuals. However, the reality of the digital trade ecosystem is more sophisticated. It is less about transferring money quickly than it is about reengineering trade infrastructure in global commerce. 

In global trade, businesses rely on identity management and trust services that provide reliable authentication and allow businesses and individuals to perform trade activities without relying on a centralised authority. 

To help us learn more about this, Trade Treasury Payments (TTP)’s Trade and Technology Editor Carter Hoffman spoke with Adam Cooper, Director of NextID Limited, and Luca Castellani, Author of UNCITRAL Model Laws on Digital Trade, to discuss how modern trust services and identity management are evolving to support a more distributed model of trust.

The backbone of digital commerce

Over 250 billion real-time global transactions occur, and cross-border trading relies on metadata that provides trust between parties. Digital trade, in fact, does not fail because transmitted data is too slow, but when it does fail, it tends to be because counterparties cannot trust the system or data on the other side.

Cooper and Castellani explained that trust is not an abstract concept. Digital trust is the infrastructure that allows businesses and individuals to perform trade. The question now is not simply “who are you” but “who is authorised and at what level of assurance?”

Castellani also notes that identification is only the starting point. “You may also have some other data quality, which is relevant, like integrity, like time,” he said. Trust services such as digital wallets and electronic signatures are great examples. These products allow users to have control over their identity within a centralised organisation.

Consumer faith in trust services 

When it comes to weaknesses in cross-border digital trade, one of the most persistent downsides lies in the mismatch between regimes. Every country identifies legal identities differently. These different governance preferences also create a mismatch in identity management, where some countries will have different practices when it comes to collecting personal identity information. A corporate registry in one country may operate under different assumptions than those in another because each country tends to have its own distinct trust infrastructure.

Cooper describes this as a problem of understanding, rather than a technical problem. An individual must know whether they are reliable or whether the trust process is sufficient. This is where trust chains emerge, a layered data source that allows the relying party to assess risk. “It’s not a green light or red light,” Cooper explains. “It’s lots of greys in between.”

The Two-Tier Reliability Model 

Countries with a strong national identity system demonstrate how the UNCITRAL Model Law on the Use and Cross-border Recognition of Identity Management and Trust Services works in practice. The model law promotes legal certainty when it comes to reliability assurance. Castellani said, “There are two solutions that are combined there”. The Two-Tier Reliability Model is designed as a foundation of modern trust services. 

Under the first-tier approach, a trust service provider must undergo a formal assessment in advance. This tier enables pre-proof identification. The first model may be found in some developing countries, where providers must be recognised before their services are widely relied upon. But, as Castellani explains, “this approach is very time-consuming”. 

The second tier allows for post-proof. In this tier, parties may decide what technology suits their needs and agree to use the technology as a primary method for legal or financial activities. “All kinds of signatures and other trust services are allowed by the law,” Castellani said. He also emphasises that this tier opens all kinds of solutions and technologies to perform trade.

The combination of the two tiers is increasingly popular as it matches predictability and flexibility. It is also the solution of choice in the European Union. Rather than locking jurisdictions into specific cryptographic methods, these two tiers create a trust framework that enhances reliability by combining pre-use assurance and post-use accountability. 

Compliance and the road ahead

While enabling reliable cross-border transactions, digital trade is shifting towards a trust framework, where nations are seeking digital solutions that promote interoperability. Compliance in digital trade is moving towards a framework that can accommodate the diversity of trade governance. According to Cooper, compliance must define the level of assurance and require metadata that proves the verifiability on the other end, asking, “What kind of tests have been completed to prove that this is who somebody claims to be?”  

Throughout the evolution of trust services, AI and blockchain technology enhance the security and distribution of metadata. This advancement adds value to metadata, allowing nations to adopt their identity management within this ecosystem. “There’s the possibility to have the determination of the reliability of the trust service before the use… and very importantly, there is the possibility to prove, in fact, the reliability after the use”, Castellani said, reinforcing the importance of the two-tier model under the compliance framework.

Looking ahead, compliance will also need to address AI-driven transactions, where attribution and integrity become critical. The integration of new technologies will foster the execution.

As humans, ensuring compliance evolves with accountability and trust becomes the heart of trust services.