The adtechs want this so they can verify the "human" quality of each user. To do this, they don't want people tapping their government ID on their phones every single time they sign up for Reddit or receive an advertisement. Hence (some derivative of) the ID has to be stored on-device to make the browsing/usage experience seamless.

Fair enough, I can see why not.

To me, it seems like just the right amount of friction, and user expectations can work in favor of privacy here: People will hopefully refuse to tap their ID on their phone for a service where they want to remain completely anonymous, even if the protocol technically might support anonymous assertions.