The usefulness depends on whether it's an external or an internal requirement. For something Hetzner need themselves it's quite useless. If there's an external requirement to verify the identity of the customer (say to shield them in case of people renting servers for criminal purposes or whatever) then an image of your passport proves that Hetzner tried to verify your identity and that you forged a government document to trick them.

Of course today we have better methods, but Hetzner was founded in the dot.com bubble and since then focused their innovation on providing cheap and reliable servers, not on changing business processes that work (or making pretty interfaces).