According to the researchers, work is underway to use digital technology so refugees and others lacking vital legal papers can have access to services such as health and education.
This could also provide a new way for ethnic minorities to be discriminated against and marginalised by officials and governments if safeguards are not in place, said the study published in the journal Big Data and Society.
Countries such as Estonia and India already offer citizens the chance to have a digital identity, while Australia, Canada and the UK are currently exploring ways to do this.
"Technology alone cannot protect human rights or prevent discrimination. Depending on how digital identity technologies are designed and used, they may also hinder the rights of those that they intend to benefit," said study lead researcher Ana Beduschi from the University of Exeter.
Having a digital identity may make people without legal documentation more visible and therefore less vulnerable to abuse and exploitation.
"However, it may also present a risk for their safety. If the information falls into the wrong hands, it may facilitate persecution by authorities targeting individuals based on their ethnicity," Beduschi said.
The World Bank estimates that over one billion people currently lack official identity documents either because they never had it, or because they have lost it and the UN Sustainable Development Goals include the aim to provide legal identity for all by 2030.
Without identity documents, people can have difficulty in accessing many basic services including healthcare, social protection, banking or education.
Asylum-seekers without documentary evidence of their identity and age may incur significant problems in acquiring legal status in a host country.
However, the study warns digital identity could allow for more "efficient" ways to discriminate against highly persecuted groups of people such as the Rohingya minority in Myanmar, as the technology would make their ethnic minority status more visible.
"Giving people a digital identity will only help protect their human rights if those who provide it mitigate any risks of potential discrimination and promote high standards of privacy and data protection," Beduschi added.
Governments and initiatives run by public-private partnerships are using technology such as blockchain and biometric data from fingerprints or iris scans to provide official identification, to control and secure external borders and to distribute humanitarian aid to populations in need.
( With inputs from IANS )