Cheqd, a blockchain startup whose software could drive the widespread adoption of digital identities, has announced it’s joining the CeDeFi Alliance with the goal of helping it to build a decentralized self-sovereign identity architecture that will open up the world of DeFi to institutional investors.

In a lengthy blog post, cheqd co-founder and CEO Fraser Edwards argues that SSI is emerging as a necessary component for regulatory compliant DeFi and that adoption simply won’t happen without it.

To that end, cheqd said it will work with the CeDeFi Alliance to build out its vision of a protocol that will be able to satisfy the legal requirements of KYC and identity checks while also enabling users – either individuals or organizations – to remain anonymous, staying true to the decentralized ethos of DeFi.

Cheqd is the creator of blockchain software that enables users to create a digital identity that can be stored on a smartphone or other device and used to verify themselves, their credit history, qualifications and more. It’s similar to a passport or a driving license in that the ID is “signed” by a trusted authority, so it can be accepted as proof by other organizations without the need for them to perform checks.

Under cheqd’s proposed system, an individual or entity would undergo a traditional KYC check once with a trusted entity and receive a secure and verified digital version of their credentials, which can then be shared with other organizations and services as required. Such a system would enable DeFi protocols and service providers to quickly verify that users are who they say they are, while also enabling them to retain their privacy.

Cheqd said its SSI architecture would be completely optional, serving as a template for DeFi protocols that are looking to tap into institutional liquidity. It will enable DeFi protocols to ensure regulatory compliance without relying on centralized systems that undermine the privacy of users.

The CeDeFi Alliance is a nonprofit organization created by Unizen and Jun Capital that’s aiming to bridge centralized finance with the emerging world of decentralized finance apps. Its mission is to bring the benefits of greater regulation, more transparency and compliance to DeFi apps in order to increase institutional adoption.

With the goals of Cheqd and the CeDeFi Alliance being so aligned, they make perfect bedfellows. Together, they said they aim to spearhead the growth of SSI by creating a robust policy framework to govern its use.

As part of this effort, the CeDeFi Alliance will use its influence with government-industry groups on blockchains and regulations to help cheqd create a compliant policy framework that will enable both individuals and organizations to use DeFi while staying compliant. It envisions that Cheqd’s novel SSI architecture will become a key element in that framework, meeting not only the highest standards of regulatory compliance but also satisfying the decentralized requirements of DeFi itself.