I think "private and secure" mean two different things here. It may be private and secure from malicious actors trying to steal your ID, but it's probably not private or secure when government decides it needs to coerce you into doing something you don't want to do.

Option 2 is more convenient, but at what cost? I would think the probabilities of the cost being high is proportional to the probability that government will have corruption and abuse the system, which seems high in history and even today in many countries.