Pseudonymization

Pseudonymization is a data management and de-identification procedure by which personally identifiable information fields within a data record are replaced by one or more artificial identifiers, or pseudonyms. A single pseudonym for each replaced field or collection of replaced fields makes the data record less identifiable while remaining suitable for data analysis and data processing.

Pseudonymization (or pseudonymisation, the spelling under European guidelines) is one way to comply with the European Union's General Data Protection Regulation (GDPR) demands for secure data storage of personal information. Pseudonymized data can be restored to its original state with the addition of information which allows individuals to be re-identified. In contrast, anonymization is intended to prevent re-identification of individuals within the dataset. Clause 18, Module Four, footnote 2 of the Adoption by the European Commission of the Implementing Decisions (EU) 2021/914 "requires rendering the data anonymous in such a way that the individual is no longer identifiable by anyone ... and that this process is irreversible."

The European Data Protection Supervisor (EDPS) on 9 December 2021 highlighted pseudonymization as the top technical supplementary measure for Schrems II compliance. Less than two weeks later, the EU Commission highlighted pseudonymization as an essential element of the equivalency decision for South Korea, which is the status that was lost by the United States under the Schrems II ruling by the Court of Justice of the European Union (CJEU).

The importance of GDPR-compliant pseudonymization increased dramatically in June 2021 when the European Data Protection Board (EDPB) and the European Commission highlighted GDPR-compliant pseudonymization as the state-of-the-art technical supplementary measure for the ongoing lawful use of EU personal data when using third country (i.e., non-EU) cloud processors or remote service providers under the "Schrems II" ruling by the CJEU. Under the GDPR and final EDPB Schrems II Guidance, the term pseudonymization requires a new protected "state" of data, producing a protected outcome that:

The combination of these protections is necessary to prevent the re-identification of data subjects without the use of additional information kept separately, as required under GDPR Article 4(5) and as further underscored by paragraph 85(4) of the final EDPB Schrems II guidance:

GDPR-compliant pseudonymization requires that data is "anonymous" in the strictest EU sense of the word – globally anonymous – but for the additional information held separately and made available under controlled conditions as authorized by the data controller for permitted re-identification of individual data subjects. Clause 18, Module Four, footnote 2 of the Adoption by the European Commission of the Implementing Decision (EU) 2021/914 "requires rendering the data anonymous in such a way that the individual is no longer identifiable by anyone, in line with recital 26 of Regulation (EU) 2016/679, and that this process is irreversible."

Before the Schrems II ruling, pseudonymization was a technique used by security experts or government officials to hide personally identifiable information to maintain data structure and privacy of information. Some common examples of sensitive information include postal code, location of individuals, names of individuals, race and gender, etc.

After the Schrems II ruling, GDPR-compliant pseudonymization must satisfy the above-noted elements as an "outcome" versus merely a technique.