The idea of the decentralized ID folks is to have some means to identify an online entity is who they say they are, mostly to comply with the orwellianly named Bank Secrecy Act and it's many international equivalents imposing some level of "know your customer" (read: snitching to the tax man). That's of course not the only use, but I sure as hell ain't sharing personal info if I don't have anything to gain by doing so. As such, the success of such projects are inherently hitched to whether they can dethrone the payment processors -- after all credit cards are the most real form of ID there is.
Why do these blockchain guys think they're going to succeed when email and DNS have all the tools to do precisely this right now off the shelf, but nobody does? Encrypted email is solved by putting in and adopting an RFC to slap public keys in DNS records, and then have cPanel, plesk and the email majors hop on board. You could then layer anything you really want within that encrypted protocol, and life's good right? Of course not. Good luck with reliable delivery, as encryption breaks milters totally. This is one of the key advantages to web5, as it imposes transaction costs to control spam.
Even then, it could probably work from a technical point of view. Suppose you had a "pay via email" product, where you enter in the KYC foo like for a bank account, and now your email and PGP keys are the key and door to that account. Thanks to clients not reliably sending read reciepts, some TXs will be in limbo thanks to random hellbans by servers. How long do you wait to follow up with a heartbeat? You'd probably want tell users that if you don't respond to the confirmation emails within some time, they are dropped. Which inevitably means the transaction is on hold until you are double sure, making this little better than putting in a CC on a web form.
This problem exists even in meatspace with real passports. Nations have invented all manner of excuses to prevent the free movements of peoples and goods for reasons both good and ill. Do not think that people will fail to dream up reasons to deny this decentralized identity of yours from delivering messages to their intended recipients. Much like bitcoin, all it takes is people refusing to recognize your "decentralized self sovereign identity card" at a whim. The cost to them of denying you is nothing, and the cost of accepting high. This reduces the usefulness of the whole tech stack to 0.
At the end of the day, if you don't have a credible plan to straight-up beat Visa and Mastercard in every KPI, your DeFi project will be stillborn:
The most credible plan I can possibly think of (other than wait for a systemic crisis to unseat these majors) would be to make such a product and intend to sell it to Visa/MC as a solution to their own internal problems. It's either that or try and grow in jurisdictions the majors don't care about, which comes with its own unique set of problems. In that situation, email might actually be the answer.