Digital ID trials test anonymous KYC for mainland China in Hong Kong

Flare and Red Date Technology successfully tested a decentralized identity system that allowed 200 mainland Chinese visitors in Hong Kong to anonymously register for regulated stablecoin services while meeting strict verification requirements, according to a press release from Flare.

The trial revealed two key applications: users could sign up for regulated stablecoin apps and purchase tokenized financial products using HKDA, a Hong Kong dollar-pegged stablecoin issued by IDA. The system connects to China’s RealDID platform to verify users’ identities without revealing personal information – a first for mainland Chinese citizens accessing public blockchain services.

“The trial showed that we can combine compliance with privacy,” said Hugo Philion, CEO of Flare Labs, in the press release. “Users remained in control of their data while meeting all know-your-customer requirements.”

During the trial, 200 mainland Chinese visitors tested a system that connects to China’s RealDID identity verification platform without revealing personal information. Users could complete two types of transactions: registering for regulated stablecoin apps and purchasing tokenized financial products with HKDA stablecoin.

“Through this trial of our blockchain infrastructure, we have shown that compliance and privacy can go hand in hand,” said Hugo Philion, co-founder of Flare and CEO of Flare Labs, according to the announcement. “We are excited to lead the way in bringing decentralized solutions to new markets, especially China, where the potential is unparalleled.”

The technical achievement lies in the system’s ability to verify identities across borders while maintaining anonymity. Flare’s blockchain uses its oracle Flare Data Connector to verify identity data between different blockchains, creating a decentralized alternative to traditional KYC systems. This means that mainland visitors can use their China RealDID to access financial services without submitting passports or bank statements.

New laws needed before public launch

Making the trial public will require new legislation, as current regulations do not cover cross-border digital identity verification. The press release states that Hong Kong is about to announce new stablecoin regulations that would allow digital currencies on public blockchains.

The potential market includes 50 million mainland visitors annually, contributing $10 billion to Hong Kong’s economy. This user base could expand as Hong Kong positions itself as a regulated gateway for Chinese users to access digital assets.

“Zero-PII KYC is a game-changer, and the use of China RealDID outside mainland China marks a new chapter for blockchain technology,” said Tim Bailey of Red Date Technology. “Together with our partners, we are breaking new ground in the field of self-sovereign digital identities.”

IDA’s Sean Lee added: “As a gateway to mainland China, Hong Kong is crucial in unlocking the potential market demand for blockchain-based financial services. IDA’s collaboration with Red Date Technology through China RealDID will enable an important step in visualizing this direction. “

Digital ID fits into the Chinese Blockchain strategy

China launched RealDID in December 2023 to verify the identity of its 1.4 billion citizens through blockchain technology. The system allows users to register on websites using private digital addresses, while giving authorities the ability to link these addresses to real identities if necessary.

Hong Kong’s position as the financial center of China makes it an ideal testing ground for blockchain services. The city receives nearly 50 million mainland visitors annually who spend more than $10 billion, creating a large potential market for regulated digital financial products.

The transition from pilot to full implementation will require both new legislation for cross-border identity verification and regulatory frameworks for stablecoin services. Success could provide a template for other jurisdictions looking to combine privacy with compliance in digital financial services.

For Hong Kong, the system adds to its growing role in regulated digital assets. The city already allows retail crypto trading and recently approved spot bitcoin ETFs. A working decentralized ID system could strengthen Hong Kong’s position as a testing ground for mainland China’s controlled approach to blockchain technology.

“As blockchain adoption accelerates within regulated environments, this model serves as a blueprint for future cross-border identity verification services and digital asset ecosystems,” Philion said.