Already exists in a lot of places. German national IDs for like 10 years or something like that have an eID feature. It's basically just a public/private key signing scheme. The government and a bunch of other trusted public providers are able to issue identities, you can sign transactions with them or verify your age to commercial service providers, or transfer some data if that's required with your consent. (https://www.personalausweisportal.de/Webs/PA/EN/citizens/ele...)

Estonia and South Korea I think also have similar features on their IDs, it's already a solved problem.