The Governance Problem
Nov 17, 2025
Why "trust the issuer" is a trap—and why liability is the escape.
Most privacy-preserving identity schemes fail because they solve the cryptography but ignore the governance. They hand-wave the hardest problem: Who runs the issuers?
The Issuer Dilemma
Any entity powerful enough to issue trusted credentials is powerful enough to abuse them.
The State: Rebuilds the surveillance system.
Private Monopolies: Creates rent-seeking chokepoints with incentives to hoard data.
Decentralized Networks: Often devolves into reputation laundering with no recourse.
The solution is not to find a benevolent issuer. It is to build a structure where issuers do not need to be trusted—they need to be liable.
The Liability Stack
The proposed Minnesota legislation structures this market through four mechanisms:
Fiduciary Duty: Authorized issuers owe a legal duty of care to relying parties. This is enforceable in court. Inaccuracy is not just a policy violation; it is a breach of duty.
Solvency Bonds: Capital, not reputation, backs the claims. Strict liability for factual errors ensures that issuers face immediate economic consequences for fraud.
Liability Piercing: You cannot hide behind a shell company. If the bond is exhausted, the Controller (the entity benefiting from the credential) is jointly and severally liable.
The Negative List: Reputation attaches to verified human identities, not corporate shells. If you commit fraud, you cannot simply form a new LLC; your bonding requirements jump to 100% collateral.
The Public Option
Markets inevitably fail the marginalized. Private issuers will serve profitable customers and exclude the rest.
To prevent this, the legislation creates the Minnesota Digital Trust Authority—an issuer of last resort. It functions like a utility:
Must-Issue Mandate: It cannot deny credentials based on profitability or "desirability".
Non-Discrimination: It cannot deny access based on the "non-biological status" of the subject.
This structure replaces faith with governance. It creates a competitive market for truth, backstopped by a public guarantee of access.