Enterprise
13 min read

Understanding LEI vs. vLEI: Key Differences Explained

Explore the key differences between LEIs and vLEIs, and how vLEIs offer enhanced security, real-time verification, and efficiency.
Written by
Tom Sargent
Published on
November 29, 2024

To understand the differences between LEIs and vLEIs you need to know what’s going on with digital identity verification and compliance. Both are key to businesses operating securely in the global digital economy but serve different purposes and offer different levels of trust and automation.

What is an LEI (Legal Entity Identifier)?

A Legal Entity Identifier (LEI) is a 20 character alphanumeric code that uniquely identifies legal entities involved in financial transactions. The LEI was introduced after the 2008 financial crisis to improve transparency in global financial markets, so regulators could track and monitor entities across borders. Each LEI contains standardized reference data about the legal entity, such as:

  • Name
  • Registered address
  • Country of registration
  • Ownership structure

The data associated with each LEI is publicly available through the Global LEI Index, a central and open repository, so anyone can verify an entity’s identity at any time. LEIs are especially important for financial institutions as many regulations worldwide require organisations to get an LEI to participate in regulated activities such as securities trading.

The LEI is based on the ISO 17442 standard, so each identifier is universally recognised. However, while LEIs provide transparency, they don’t automatically update or verify the status of the entity, so manual checks are often required to ensure the data is still valid. That’s where the limitations of LEIs become apparent and it’s where vLEIs come in.

What is a vLEI (Verifiable Legal Entity Identifier)?

A Verifiable Legal Entity Identifier (vLEI) takes the basic concept of an LEI and adds cryptographic trust. The vLEI is a digital, verifiable credential that uses the W3C Verifiable Credentials standard to create a more secure, automated way to verify an organisation’s identity in real time. So a vLEI holds the same information as an LEI, but also has cryptographic proofs embedded in the credential. These proofs ensure the vLEI is up to date, authentic and tamper proof.

Unlike the traditional LEI which relies on static, manually updated data, the vLEI automates the verification process so anyone can instantly verify an organisation without having to cross check records or do manual checks. This makes for a much more efficient and trustworthy identity verification process for businesses, regulators and other parties.

vLEIs and Digital Trust

Digital trust is key in today’s connected business world. Traditional LEIs provide a foundation of trust by making key org data public but the manual verification process is slow, inefficient and prone to human error. vLEIs change this by embedding trust into the credential itself using cryptography.

Key benefits of vLEIs for digital trust:

  • Automated verification: vLEIs allow real-time automated verification of org data. This reduces the time and effort to verify organisations especially in industries like finance or supply chain where trust is paramount.
  • Cryptographic proofs: The vLEI credentials include cryptographic proofs that the identity has not been changed or tampered with. This is a more secure way to verify identity data.
  • Delegation of authority: A vLEI can be delegated to authorized representatives within an org, to prove that a specific person has the right to act on behalf of the company in a specific role. This can simplify processes like contract signing, access control and client onboarding.

LEIs vs vLEIs

Knowing the differences between LEIs and vLEIs is key for businesses that want to streamline their identity verification process. Here’s a breakdown:

Static vs Dynamic Data:

  • LEI: Static identity data that may need to be manually checked for accuracy.
  • vLEI: Real-time, cryptographically verified data that can be trusted automatically.

Verification Process:

  • LEI: Manual validation which can be slow and prone to human error.
  • vLEI: Automated verification through cryptographic proofs, no manual process required.

Cryptographic Technology:

  • LEI: No cryptographic technology, limited tamper resistance.
  • vLEI: Cryptographic verification, data is much more secure and less prone to fraud or tampering.

Delegation of Authority:

  • LEI: Identifies the org but no means to prove individual roles or authority within the org.
  • vLEI: Can be delegated to specific representatives, verifiable credentials for individuals acting on behalf of the org.

Speed:

  • LEI: Can take days to verify.
  • vLEI: Verifiable instantly through cryptography, much faster and more efficient.

vLEIs in the Verifiable Credentials Ecosystem

vLEIs are a type of verifiable credential for org identity. Verifiable credentials is a broader term that includes various types of digitally-verifiable information like academic qualifications, employment history or financial status. Together these credentials form a network of trust that enables automated verification across business use cases.

This way multiple credentials can be issued and verified for both orgs and individuals, creating a network of trust. For example a bank can use vLEIs to verify the org identity of their corporate clients and additional verifiable credentials to verify the qualifications of the key people within those orgs.

How to Adopt vLEIs in Your Organization

For companies interested in adopting vLEIs, first you need to get a traditional LEI from a GLEIF-accredited LOU if you don’t already have one. Once you have the LEI, you can work with a vLEI issuer to get the verifiable credential.

Next you need to identify the key use cases in your business where vLEIs will add value. This could be customer onboarding, contract signing or secure authentication. Once you have the key processes identified, you can work with your technology partners and internal stakeholders to integrate the vLEI system into your existing workflows.

Using vLEIs in your daily business not only adds security but also future proofs your organisation against changing regulations and digital identity standards. By getting vLEIs you can be ahead of the game, more efficient and trusted by your customers and partners worldwide.

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The Evolution of Digital Identity

As we delve into the history, milestones, case studies, and future directions of digital identity, this guide aims to provide a comprehensive overview of its evolution. Through this exploration, we hope to shed light on the importance of digital identity in shaping our digital futures, preparing us for the next chapter in this ever-evolving narrative.
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