A Survey on Blockchain Based Secured Banking Using Self Sovereign Identity (SSI) and Verifiable Credentials (VC)

Abstract

Traditional digital banking is hampered by inefficient, repetitive and costly identity verification processes like Know Your Customer (KYC), which create significant friction for customers and operational burdens for financial institutions. This paper introduces a novel framework that integrates Self-Sovereign Identity (SSI) and Verifiable Credentials (VCs) with a permissioned blockchain ecosystem to address these challenges. The proposed user-centric model enhances security, streamlines regulatory compliance, reduces fraud, and empowers users with direct control over their digital identities. By leveraging the immutability of blockchain for trust and the portability of VCs for data exchange, this framework fundamentally re-architects the trust relationship between customers and banks, paving the way for a more efficient, secure, and inclusive financial future.

Introduction

The digital transformation of finance has advanced, but customer identity verification (KYC/AML) remains a major bottleneck, due to:

• Siloed legacy systems

• Manual, repetitive processes

• Constantly changing regulations

These inefficiencies result in:

• Poor customer onboarding experiences (high abandonment rates)

• Operational cost burdens

• Centralized data silos, increasing risk of cyberattacks

2. Proposed Solution

Decentralized technologies, particularly blockchain, offer a new paradigm:

• Reduce reliance on intermediaries

• Enable Self-Sovereign Identity (SSI) and Verifiable Credentials (VCs)

• Support Central Bank Digital Currencies (CBDCs) within permissioned blockchain ecosystems

This hybrid framework combines:

• The regulatory control of permissioned blockchains

• The user autonomy of SSI and VCs

• Enhanced privacy, security, and interoperability across borders

3. Motivations

A. Need for Trustworthy Digital Systems

• Traditional systems are inefficient and expensive

• Current CBDC pilots struggle with balancing privacy and compliance

• Weak identity verification increases fraud and decreases trust

B. Role of SSI and VCs

• SSI gives users control of identity data (not centralized databases)

• VCs allow tamper-proof identity proof with selective disclosure, complying with KYC/AML while preserving privacy

C. Digital Infrastructure Advancements

• Blockchain ensures transparency and immutability

• Zero-knowledge proofs (ZKPs) add privacy without compromising compliance

4. Literature Review Highlights

Several key studies have explored the technical and governance aspects of SSI, CBDCs, and privacy technologies:

5. Core Proposition

Integrating CBDCs with SSI and VCs can:

• Enable secure, portable digital identities

• Support cross-border interoperability

• Reduce fraud, enhance transparency

• Ensure data sovereignty and regulatory compliance

This represents a step toward a resilient, inclusive, and user-centric digital financial ecosystem.

References

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Copyright

Copyright © 2025 Anuradha Badage, Aman , Harshit Mohanty, Kumar Ayush, Md Jaki Imam. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.