A national ID database, created by the government will be used for this purpose.
It might be public record in Iceland and all, but in other european states it's not legal to have access to such a list, due to security reasons. Even the ID number, one printed on the ID card, one assign to each citizen, is in some countries protested by privacy laws to prevent theft of identity.
So now you understand how some people think this is the crypto of Iceland, maybe backed by the government...And I don't have a problem with this. Auroracoin and its network will be ownerless just like Bitcoin. If the government facilitates the transition, then it will be a huge coup for cryptocurrencies. Auroracoin could become the model for transitioning struggling countries from fiat to sound money.