Do hosting provider require verification for domain purchased elsewhere?

@Rugrats - you don't mention which TLD (top level domain) your domain is under? .com, .uk, or something else?

I know for .uk domains nominet can be quite demanding about having correct contact details - theukdomain.uk/hel…ed/

Not aware of any technical functionality that requires link (sic) between domain owner ID and hosting account-holder ID.

Generic observations:
• a professional organisation will state any routine requirement for customer ID within its t&c/policies during signup and same will be available to view at any time on its website or via request.
• any specific request for personal ID will(should) be accompanied by the reason for requesting the ID, typically by referring to any previously agreed ID disclosure circumstances (such as during signup).
• any UK-based organisation requesting personal ID should have valid Data Protection Registration with ICO. Failure to do so exposes the organisation to a £4,000 fine.

Typical non-routine demands for customer ID may be related to service payment irregularities and/or as a result of abuse complaints, examples being questionable hosted content or suggestions of corporate-ID hijack.

Also consider the credibility of the wording of any personal ID request. Example:
any request specifically demanding

your passport for ID verification

is not credible as the legitimacy of a passport can only be "verified" by certain Gov organisations, not by some random commercial company.
Such specific passport requests are beneficial to nefarious customers who can present a credible-appearing PP with photo of a person resembling Mickey Mouse but the demanding organisation is unable to "verify" it is not MM.

Final takeaway:
is the request genuinely from your host?

It's not something I've heard of before and I used to work for a hosting provider. Who's the host in question here?

That's not how the internet works...

The internet was built on the premise of retaining one's anonymity, hence the domain registrar requesting your ID is over-stepping its remit for dot com domains (dot co dot uk domains are different – all domain registrars, on behalf of Nominet [who manages and operates dot co dot uk domains], demand address verification to ensure all their domains are purchased by UK addressees).

I highly suggest you transfer your domain to NameCheap.com. Despite their business name sounding corny / dodgy, I can assure you that they have been good for me (owning a couple of domains) and they've been in business for 20 or so years. Their prices are favourable too.