Xbox is legally required in some territories, such as the UK and, more recently, Australia, to verify the age of its users in order to access certain features.
Whether we like it or not, there's no way around it. Governments will always government. But what most of us objected to more was the use of faceless third-parties that were being used to verify some of our most personal information. In Xbox's case, it was Yoti, a company that's found itself in hot water before over its handling of data.