There's a lot of moral outrage regarding this proposal, rightfully so. In fact, it should be further intensified. But apart from that, I don't think this proposal will work in any case.
When implemented without holdouts (closed loop), you do have a tight DRM web, which will attract legislators. Or so we hope.
When implemented with holdouts, it's barely useful to websites since they still need the backup mechanisms to detect fraud that they have anyway. If they need to keep it around, might as well use that as singular solution which has the added "benefit" of collecting way more personal data.
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