OpenAI founder's Web3 project Worldcoin, why does it encounter regulatory obstacles everywhere?

Author: Liu Honglin

The Privacy Commissioner for Personal Data (PCPD) in Hong Kong recently conducted an investigation into the Worldcoin project and found that its operations in Hong Kong have violated the Personal Data (Privacy) Ordinance (PDPO).

On May 22, Privacy Commissioner for Personal Data, Elizabeth Denham, issued an enforcement notice to Worldcoin, ordering an immediate cessation of all projects in Hong Kong involving the use of iris scanning devices to scan and collect public iris and facial images.

PCPD began investigating the Worldcoin project in January 2024 to determine whether the identity verification method poses a serious risk to the privacy of citizens’ personal data and violates the requirements of the Personal Data (Privacy) Ordinance.

In December 2023 to January 2024, PCPD conducted 10 secret visits to six locations related to the operation of the Worldcoin project. According to PCPD, during the operation in Hong Kong, Worldcoin scanned the faces and irises of 8,302 individuals for verification purposes. Collecting facial images for verifying participants’ authenticity was unnecessary, as iris scanning operators were able to personally conduct this verification at the operation sites, rendering scanning or collecting facial images unnecessary steps. At the same time, Worldcoin’s privacy statement does not have a Chinese version, which means non-English participants cannot understand the project’s policies, practices, terms, and conditions. In PCPD’s view, Worldcoin failed to provide sufficient information, hindering people from making informed decisions and giving true consent.

Based on the above reasons, the PCPD believes that the collection of facial and iris images by Worldcoin is unfair and illegal, and violates its data protection principles. The PCPD ruled that it is unreasonable for Worldcoin to retain sensitive biometric data, including facial and iris images, for up to 10 years, solely for the purpose of training artificial intelligence models.

Worldcoin Introduction

Worldcoin’s Mainnet and its virtual currency, Worldcoin, officially launched in more than 20 countries on July 24, 2023. Since the launch, its price has fluctuated. As of May 17, 2024, the price of Worldcoin has reached $4.863.

As of May 17, 2024, according to the data displayed on the Worldcoin official website, Worldcoin has been online for 298 days, and World ID certified users cover 160+ countries/regions. The Worldcoin official website claims that Worldcoin is committed to becoming the largest real-person identity and financial network in the world, protecting privacy, and being owned by everyone. Worldcoin aims to provide a channel for everyone to participate in the global economy, regardless of country/region and background, and to create a place of benefit for everyone in the AI era.

Worldcoin’s co-founder is Sam Altman. In addition to being a co-founder of Worldcoin, Sam Altman also served as the president of the startup accelerator Y Combinator from 2014 to 2019, and as the CEO of the artificial intelligence company OpenAI from 2019 to 2023. He is known for his belief in Artificial General Intelligence (AGI), and he believes that AGI will be able to accomplish anything that humans can do.

OpenAI launched the first version of the ChatGPT model in June 2020 and has since released multiple updated versions. The official website of ChatGPT claims, “Our mission is to ensure that artificial general intelligence benefits all of humanity.”

Similar to this, the Worldcoin White Paper also claims that its founding mission is to create a globally inclusive identity and financial network owned by the majority of humanity. If successful, it could significantly increase economic opportunities, provide a reliable solution to distinguish between humans and AI on the Internet while protecting privacy, promote global democratic processes, and demonstrate the potential path of AI-empowered Universal Basic Income (UBI).

The Three Elements of Worldcoin

Worldcoin includes three main elements, namely World ID, Worldcoin Token, and World App.

（一）World ID

World ID is an identity authentication method that focuses on privacy protection. Users can verify themselves as human beings online through a device called Orb while maintaining personal privacy. This verification is based on Zero-Knowledge Proof technology, which ensures the completion of identity verification without revealing user’s detailed information. World ID has personal exclusivity and is only for use by its holder. Even in the case of loss or theft, users can recover their World ID.

（二）Worldcoin Token

In order to encourage the growth of user numbers, Worldcoin will distribute tokens to all network participants. This could lead to Worldcoin becoming the most widely distributed digital asset.

(3) World App

World App is the first application of World ID. It can guide users to authenticate their identities through Orb, manage their World ID credentials, and share these credentials with third parties while protecting privacy. The app also provides seamless access to global decentralized finance services.

Worldcoin is based on World ID, aiming to conduct airdrops fairly, protect social media from robot/Sybil attacks, and achieve fair distribution of limited resources. If you want to participate in the Worldcoin protocol, you should first download the World APP and authenticate your identity through Orb to obtain a World ID.

Worldcoin’s Features - Biometric Verification

The significant feature of Worldcoin is to verify each unique individual through biometric authentication. The idea behind Worldcoin is that rapidly advancing artificial intelligence can generate content that is trusted to be “human.” Therefore, inclusivity and privacy protection are crucial in the operation of public infrastructure. Filtering out a lot of noise from the digital world can be achieved by ensuring that every piece of information or transaction generated contains “verified human attributes.” Currently, the collective decision-making in Web3 relies heavily on token management, which has resulted in some people being excluded from the governance system while others have an advantage in possessing more economic rights. Therefore, it is becoming increasingly important to include every individual in the governance system, which will be the foundation for maximizing the benefits of artificial intelligence for all humanity.

Through biometric authentication, the authentication of each real person is also related to the allocation of social resources. With the advancement of artificial intelligence, the fair distribution of usage rights and some created value through UBI will play an increasingly important role in offsetting the concentration of economic power. Decentralized identity verification protocols can assist any project or organization globally in achieving fair resource allocation. Obtaining World ID through biometric authentication can ensure that each person is only verified once, preventing multiple registrations and ensuring fair distribution. In addition, biometric authentication can also effectively ensure the security of World ID, ensuring that only individuals who hold the ID can use it, and recovering it in case of ID loss or damage.

Worldcoin uses iris biometric technology to verify personal information. Tools for Humanity, the consultant of the Worldcoin Foundation and the operator of World App, has released Orb to complete the aforementioned verification.

Reasons for Worldcoin Restrictions

“In the ‘Terms and Conditions of WORLDCOIN Foundation’, it is stated: ‘In order to use the service… you must comply with all of the following conditions: You are not located in, under the jurisdiction of, or a citizen or resident of the following countries or regions: Syria, Crimea in Ukraine, Donetsk, Luhansk, Kherson and Zaporizhzhia regions, Russia, North Korea, Iran, Cuba, or the United States, European Union, or any other country or jurisdiction where access to the service is restricted… If you do not meet all of these requirements, you may not access or use the service.’”

(1) Impact of Virtual Money Policy

Different countries have different policies, laws, and regulations regarding virtual currencies, so the market environment faced by virtual currencies varies greatly in different countries. As a virtual currency, the Worldcoin token is no exception. The attitudes of different countries towards virtual currencies vary, so the purchase and use of Worldcoin tokens are restricted in some countries. Some countries impose restrictions on virtual currencies to prevent financial risks and illegal activities.

China. On December 3, 2013, Chinese regulatory authorities issued the “Notice on Preventing Bitcoin Risks” (Silver发).[2013]“In order to protect the property rights and interests of the general public, safeguard the legal status of the Chinese yuan as the legal currency, prevent money laundering risks, and maintain financial stability, the notice states that “Bitcoin should be a specific virtual commodity and does not have the same legal status as currency. It should not and cannot be used as a means of circulation in the market.” From 2013 to 2014, China positioned Bitcoin as a “virtual commodity” and allowed individuals to hold it at their own risk, while prohibiting banks and payment institutions from providing services for Bitcoin transactions. Between 2017 and 2019, Chinese regulatory agencies introduced a series of regulations on virtual currencies, declaring ICOs illegal, banning trading platforms from operating within China, and also prohibiting the mining industry. On September 15, 2021, Chinese regulatory agencies issued the “Notice on Further Preventing and Dealing with the Risks of Speculative Trading of Virtual Currency” (Yinfa [2021] No. 237), pointing out that “recently, speculative trading activities of virtual currencies have been on the rise, disrupting economic and financial order, breeding illegal activities such as gambling, illegal fundraising, fraud, pyramid schemes, and money laundering, seriously endangering the property security of the people. In order to further prevent and deal with the risks of speculative trading of virtual currencies and effectively maintain national security and social stability”, it is stipulated that virtual currency-related business activities are illegal financial activities, and if engaging in virtual currency-related business activities constitutes a crime, criminal responsibility shall be pursued in accordance with the law.”

South Korea. In September 2017, the Financial Services Commission (FSC) of South Korea issued a decision to ban ICOs and credit transactions of virtual money. According to News1Kim, Deputy Chairman Kim Yong-Bum of the FSC stated, “Financial authorities are banning ICOs. The purpose is to prevent market damage caused by an increase in speculative receivables due to ICO fraud that could lead to overheating.” On July 18, 2023, the FSC issued the “Act on the Protection of Virtual Asset Users.” This law aims to protect the rights and interests of virtual asset users, promote transparency in the virtual asset market, and establish sound trading practices by regulating asset protection, unfair trading practices, supervision, and disposal of virtual assets.

(2) Application of Biometric Technology

Worldcoin’s use of iris biometric technology to verify personal information is also a reason for its restriction in some countries.

Kenya. Kenya is one of the first countries to launch Worldcoin registration and certification. However, the Kenyan government later issued a ban and suspended Worldcoin’s registration and certification in the country. The Kenyan Ministry of Interior announced in a statement that “Worldcoin activities are immediately suspended until the relevant government agencies prove that there is no public risk.” The government expressed concerns about Worldcoin’s activities in registering citizens through the collection of eye/iris data and stated that an investigation has been launched “to determine the authenticity and legality of the activities, the security and protection of the collected data, and the intentions of the collectors in using this data.”

France. France has a skeptical attitude towards Worldcoin’s collection of user iris information. The French data protection regulatory authority, the National Commission for Information Technology and Civil Liberties (CNIL), has questioned Worldcoin’s biometric data collection methods, particularly regarding their legality and storage conditions. Therefore, CNIL has initiated an investigation into Worldcoin’s data collection and processing activities to ensure compliance with French and European data protection regulations. This investigation has also received assistance from the authorities in the Bavarian state of Germany.

The Bavarian State Office for Data Protection Supervision in Germany has also conducted an investigation into the handling of sensitive biometric information by Worldcoin, starting from November 2022. The office has expressed concerns about the large-scale processing of biometric information by Worldcoin, stating that these technologies are “neither mature nor adequately analyzed” in terms of their specific core purposes in handling financial information.

The Spanish Data Protection Agency (AEPD) has ordered Worldcoin to stop collecting and processing data in Spain and has issued a temporary ban for a period of three months. The AEPD’s order claims that the agency is investigating complaints regarding Spanish users being unable to withdraw consent and Worldcoin’s alleged collection of data from minors. “The AEPD requests the cessation of the collection and processing of special categories of personal data, and the blocking of data already collected. The AEPD has received several complaints, including insufficient information, collection of data from minors, or the inability to withdraw consent.”

Summary

Worldcoin project carries the founder’s vision. The White Paper proudly proclaims that Worldcoin will respect user privacy and include everyone in the global economy regardless of nationality, region, or background. It aims to create a globally inclusive identity and financial network owned by the majority of humanity, and is committed to significantly increasing economic opportunities and promoting global democratic processes. However, in reality, the operation of Worldcoin is influenced by the virtual currency policies of various countries. In addition, Worldcoin’s collection of biometric data has also led to investigations and restrictions.