Hong Kong’s financial regulators are exploring digital identity verification solutions that would enable anonymous Know Your Customer (KYC) procedures for mainland Chinese citizens, according to sources familiar with the initiative. The trials aim to balance privacy requirements with regulatory compliance in cross-border financial services.
The project builds upon Hong Kong’s existing digital identity framework, which launched in 2020. The new trials incorporate advanced cryptographic techniques including threshold signatures and fuzzy cliques to enable privacy-preserving identity verification.
According to regulatory documents, the system would comply with Financial Action Task Force (FATF) recommendations while maintaining user privacy through zero-knowledge proofs. This approach allows financial institutions to verify customer identities without accessing underlying personal data.
The Hong Kong Monetary Authority (HKMA) states that the trials align with international standards, including ISO 27701 for privacy information management. The implementation follows guidelines from key regulatory bodies including FinCEN and the FATF for anti-money laundering (AML) compliance.
“The goal is to enable secure, compliant cross-border financial services while protecting individual privacy,” explained a senior HKMA official who requested anonymity. “We’re leveraging advanced cryptography to meet both regulatory and privacy requirements.”
The trials incorporate decentralized identity technology similar to systems being tested in other jurisdictions. Key features include biometric liveness detection to prevent fraud, ensuring that only genuine users can access services. It leverages blockchain-based credential verification for secure and reliable identity validation. Privacy-preserving data-sharing protocols protect user information during transactions, prioritizing confidentiality and compliance with data protection standards. Additionally, the platform supports cross-border regulatory compliance frameworks, facilitating seamless operations across different regions and jurisdictions.
The HKMA expects to complete initial trials by mid-2025.
Sources: Hong Kong Monetary Authority, Financial Action Task Force
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November 8, 2024 – by the ID Tech Editorial Team
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