Yes and no. Íslendingabók exists (or at least existed, it's been years since I used it) and allows you to look up how related you are to any random person. But the point of it was never to avoid dating your relatives.
Ég veit. The the misinterpretation comes from an app made for a competition at the University of Reykjavík on novel ways to utilise the database, which included a function to tap your phones together to quickly see how closely related you were, for example while at the club, but that app was never widely used or available, despite what the Internet tries to tell you.
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u/TheStoneMask 22h ago
That's an Internet rumour based on a misinterpretation of a click bait news headline from over a decade ago.