Hong Kong Trials Allow Chinese Nationals to Buy Stablecoins

• Flare and Red Date Technology are set to conduct trials in Hong Kong, enabling mainland Chinese residents to buy stablecoins issued by IDA through a process that ensures compliance with Chinese real-name laws while allowing for anonymous registration.

• This initiative leverages the China Real-Name Decentralized Identifier System (RealDID) to facilitate legal transactions involving stablecoins like HKDA, aligning with the new stablecoin regulations in Hong Kong.

• Notably, major stablecoins such as Tether and Circle's U.S. dollar stablecoins are not included in these trials.

Trial Overview

Layer-1 blockchain Flare, in collaboration with decentralized cloud infrastructure firm Red Date Technology, has announced two significant trials aimed at allowing mainland Chinese residents to purchase stablecoins in Hong Kong.

• The first trial will allow for anonymous registration on a regulated stablecoin application.
• The second trial will enable the purchase of tokenized financial products using the stablecoin.

The companies stated, "With Hong Kong on the cusp of announcing new stablecoin regulations allowing digital currencies on public blockchains, the introduction of this KYC solution trial gives Mainland Chinese residents their first opportunity to legally hold public chain wallets and transact with stablecoins, such as HKDA, a fiat-referenced Hong Kong Dollar stablecoin issued by IDA."

China's Blockchain Landscape

China maintains a stringent stance against its residents engaging in cryptocurrency trading, yet the country continues to invest heavily in blockchain technology. While crypto trading remains popular, state-backed initiatives typically focus on business-to-business (B2B) applications rather than consumer use cases.

• Blockchains in China are often permissioned rather than permissionless, and NFT projects have been cautioned to prioritize collection over speculation.

RealDID Implementation

The trials in Hong Kong will utilize the China Real-Name Decentralized Identifier System (RealDID) for the anonymous registration process. This blockchain-based ID system was launched in December of the previous year and is managed by the Blockchain-based Service Network, supported by Red Date Technology and the Ministry of Public Security's First Research Institute.

• Chinese law mandates real-name registration for users on digital services platforms. However, RealDID allows users to remain anonymous to companies while still complying with real-name registration requirements.

• In Hong Kong, users will have access to stablecoins and other token-based financial products without needing to provide passports or bank statements.

It remains unclear whether major stablecoins, such as Tether and Circle's U.S. dollar stablecoins, will be part of this initiative.