Authors: Ren Yiying, Wang Jian, Zhu Yifan, Zhang Xuzheng, Source: International Finance. Abstract: Currently, the global cross-border payment system relies heavily on the "SWIFT+CHIPS" architecture, plagued by inefficiencies, weak oversight, and political weaponization. Against this backdrop, the mBridge project, jointly promoted by multilateral central banks, and privately led stablecoin initiatives have emerged as two parallel and evolving innovative approaches. The former leverages central bank credit and distributed ledger technology to build a cross-border CBDC peer-to-peer real-time settlement network; the latter leverages public blockchains to achieve cost reduction and near-instant settlement for high-frequency, small-value payments. This article systematically examines the technical architectures, governance models, and application scenarios of these two approaches, revealing their complementary relationship between sovereign compliance and market efficiency. Research has found that the future cross-border payment system may adopt a "dual-track" structure: mBridge strengthens official settlement infrastructure, while stablecoins fill the gap in inclusive finance. The coordinated development of these two will drive the evolution of the global payment system towards a more efficient and decentralized direction. Keywords: cross-border payment; mBridge; CBDC; stablecoin; SWIFT system. The core support of the current global cross-border payment system is the two-tier architecture of "SWIFT + CHIPS" (Society for Worldwide Interbank Financial Telecommunication + New York Clearing House Interbank Payments System). SWIFT, as the global interbank messaging system, primarily handles information transmission, while funds clearing is carried out through CHIPS. Since US banks can directly open accounts at the Federal Reserve Bank of New York for settlement, while non-US banks must indirectly access the CHIPS system through their US correspondent banks, this model has resulted in a multi-tiered, multi-linked correspondent banking system, resulting in high cross-border payment costs, delayed processing times, and limited regulatory efficiency. In recent years, the US has repeatedly used SWIFT and CHIPS to impose sanctions on other countries, highlighting the political risks of the cross-border payment system and increasing the global urgency for the exploration of alternative mechanisms. Against this backdrop, the "Multilateral Currency Bridge" (mBridge), centered around central bank digital currencies (CBDCs), and "blockchain stablecoins" issued by the private sector have emerged as two parallel paths of evolution. The former is a CBDC cross-border clearing network coordinated by central banks under the Bank for International Settlements (BIS). By building a common platform based on distributed ledger technology, it supports multiple central banks in directly issuing and exchanging their own CBDCs for cross-border payment settlement (Song Shuang, 2024). The latter is an on-chain stablecoin issued by the private sector, typically fully collateralized by assets such as fiat currency and government bonds. It relies on public blockchains to build a decentralized cross-border payment network, bypassing traditional financial intermediaries through technological means (Lu Minfeng et al., 2025). While the two differ significantly in their technical architecture, governance logic, and applicable scenarios, both aim to address the structural bottlenecks of the traditional system. This article systematically examines the operating mechanisms and bottlenecks of the traditional payment system, evaluates the development principles, technical architecture, and application trends of mBridge and stablecoins, and further compares their institutional advantages and potential risks. It also offers policy recommendations for the development of my country's cross-border payment system. 01. The Driving Force for Innovation in the Global Cross-Border Payment System. Currently, the "SWIFT+CHIPS" system, which primarily supports global cross-border payments, is highly centralized, dollar-based, and complex. This system presents three key challenges: First, it is inefficient and costly. The traditional correspondent banking model requires multiple nodes, including the originating bank, intermediary bank, and receiving bank, operating in varying time zones, regulations, and systems. This results in an average cross-border remittance taking 3-5 business days. Furthermore, fees may be charged at each stage, and foreign exchange conversion carries with it price differentials, resulting in excessively high transaction costs (Xue Xinhong et al., 2024), making it particularly unfavorable for small-value payments and users in developing countries. Second, regulatory information fragmentation and increased compliance risks are exacerbated. Because SWIFT transmits information flows while funds flow through account transfers, creating a disjointed chain, regulators struggle to fully grasp transaction status and fund paths in real time, posing significant challenges to anti-money laundering and counter-terrorist financing compliance reviews. Third, the system is susceptible to geopolitical instrumentalization. SWIFT's neutrality has been widely questioned. Historically, the United States has repeatedly leveraged its influence over the SWIFT and CHIPS systems to impose financial sanctions on other countries. For example, the US excluded several Iranian banks from the SWIFT system, dealing a significant blow to the Iranian economy; and after the outbreak of the Russia-Ukraine conflict in 2022, it severed SWIFT connections for some Russian banks. 02 mBridge: A Central Bank-Led Digital Currency Bridge Path (I) Technical Architecture, Mechanism Principles, and Development Significance mBridge, as the world's first multilateral central bank digital currency cross-border payment platform, has established a new paradigm for efficient, low-cost, and secure cross-border payments through the innovative integration of distributed ledger technology (DLT) and CBDC. Its core principle is to leverage the characteristics of distributed ledger technology and CBDC to build a decentralized cross-border payment network. In this network, central banks or monetary authorities of various countries and regions participate as nodes, jointly maintaining a synchronized, real-time updated ledger. By digitally recording every cross-border payment transaction on the blockchain, this ensures immutability, transparency, and traceability. Specifically, the mBridge platform interconnects the digital currency systems of various central banks or monetary authorities through a "corridor network" design. When making a cross-border payment, commercial banks first exchange their national or regional CBDC for depositary receipts (DRs) on the platform. Blockchain technology then facilitates peer-to-peer transfers and settlements. This entire process bypasses the multiple correspondent banks involved in traditional cross-border payments, significantly shortening the transaction process, reducing costs and latency, while also improving transparency and security. The mBridge project adheres to the three principles of "losslessness, compliance, and interoperability." While ensuring the monetary sovereignty of each country and region, it utilizes embedded regulatory modules to meet the differentiated requirements of each country and region, enabling seamless integration between different CBDC systems. These principles lay the foundation for the stable operation and widespread acceptance of mBridge, enabling it to play a vital role in the complex international financial environment. mBridge is of great significance to the internationalization of the RMB. Through the mBridge platform, the digital RMB can more conveniently circulate and settle across borders, expanding its scope of use and market share in international payments and enhancing its international status and influence. For example, under the framework of the Belt and Road Initiative, China provides DLT infrastructure to developing countries such as Bangladesh and Egypt, offering technical assistance in exchange for an increase in their RMB reserve holdings. At the same time, mBridge also provides a platform for cooperation and exchange on CBDCs in other countries and regions, promoting the diversification and balanced development of the global monetary system and serving as a testing ground for international monetary system reform. (II) Project Progress and Application Results As one of the world's largest CBDC cross-border payment pilot projects, the mBridge project has achieved breakthrough progress from concept to implementation both domestically and internationally. Internationally, in 2022, the mBridge project completed the first pilot test based on real-world transaction scenarios, completing 164 simultaneous cross-border payment and foreign exchange settlement transactions, with a settlement amount equivalent to over 150 million RMB. The Saudi Central Bank became a full partner of the mBridge project in June 2024, and in September of the same year, RMB oil settlement was launched, marking a new phase in the energy trade pricing system driven by digital currency. These projects have validated mBridge's potential to improve cross-border payment efficiency and reduce costs, demonstrating its feasibility and advantages in practical applications. In China, mBridge has been deployed in Wenzhou and Huzhou, Zhejiang, Foshan, Guangdong, and Guangxi, helping businesses handle cross-border RMB remittances. The mBridge platform significantly shortens cross-border transaction times for businesses. Remittances that previously took 24 hours to arrive can now be processed within an hour, while also avoiding SWIFT telecommunications and correspondent bank fees. This significantly improves cross-border payment efficiency, reduces transaction costs and exchange rate risks for businesses, and provides more convenient and efficient payment services for cross-border trade and investment, becoming a key vehicle for RMB internationalization. (III) Regulatory Challenges and Solutions As an innovative cross-border payment infrastructure, mBridge faces the following challenges in its further global application and promotion: First, the core of mBridge lies in connecting CBDC systems based on different technical architectures in different countries and regions. Ensuring seamless, secure, and efficient interoperability between these heterogeneous systems presents significant challenges. Technical failures or upgrades in any one of these systems could impact the stability of the entire network. Second, mBridge involves multiple national and regional central banks or monetary authorities, as well as regulatory bodies, making it difficult to establish an efficient, fair, and widely accepted governance framework for decision-making mechanisms, entry standards, and cost-sharing. Central banks or monetary authorities differ significantly in CBDC design, data privacy, anti-money laundering and counter-terrorist financing, and capital flow management. Reconciling these various aspects requires significant human, material, and time-consuming efforts. Third, mBridge provides near-real-time cross-border settlement, which could accelerate capital flows and amplify exchange rate and financial market fluctuations. During periods of stress, rapid capital flight could exacerbate financial instability, and frictions in integration with the traditional financial system could create new systemic risks. The robust development of mBridge requires systematic solutions and coordinated international governance. On the one hand, mBridge will continue to strengthen its integration with other international payment systems and standards to enhance interoperability and compatibility. For example, mBridge can interconnect with traditional payment networks such as SWIFT and CIPS, building a dual-track "traditional + digital currency" infrastructure. This will create a complementary effect and jointly promote the optimization and upgrading of the global cross-border payment system. On the other hand, mBridge will encourage central banks or monetary authorities in various countries and regions to further improve their regulatory frameworks for CBDCs, strengthen international cooperation and coordination, and establish a more unified, transparent, and efficient cross-border payment regulatory system. This will help prevent financial risks, maintain financial stability, and provide solid regulatory support for the healthy development of mBridge. 03 Stablecoins: A Technological Alternative Driven by Market Efficiency (I) Definition, Operating Mechanism, and Competitive Advantages Stablecoins are an innovative monetary system design. They differ fundamentally from both traditional fiat currencies and the highly volatile cryptocurrencies. Instead, they combine the value stability of traditional fiat currencies with the technological advantages of cryptocurrencies. The core mechanism of stablecoins can be summarized as follows: they are issued by the private sector and backed 100% by real assets. These assets can be a single domestic or foreign fiat currency or a diversified portfolio of financial assets such as government bonds, precious metals, and even other cryptocurrencies. Technically, the issuance and circulation system relies on distributed ledger technology (DLT), ensuring transparency, immutability, and decentralization of transactions. Hong Kong's regulatory framework for stablecoins is a typical example of this institutional design. As a private entity, the issuer must reserve an equivalent amount of highly liquid real assets to support the issuance of the stablecoin, such as Hong Kong dollar deposits, foreign exchange reserves, or AAA-rated bonds, and undergo regular verification of the reserve adequacy ratio by a third-party auditor. This design ensures that each stablecoin is backed by real assets, and stablecoin holders can redeem their reserve assets at any time, effectively mitigating the risk of excessive money issuance. When the reserve assets are fiat currencies, stablecoins effectively become a digital extension of fiat currencies, with a credit rating approaching that of sovereign currencies. Furthermore, due to the nature of distributed ledgers, stablecoin transactions enjoy limited anonymity. While ordinary users' transaction information is encrypted, regulators can obtain specific transaction traceability data through legal authorization. This protects the privacy of market participants while providing necessary oversight for judicial and regulatory bodies. Furthermore, the peer-to-peer nature of distributed ledgers gives stablecoins a natural advantage in cross-border payments, enabling them to transcend traditional borders and provide a low-friction solution for the international payment system. (II) Development History and Risk Events Stablecoins were created to address the structural contradiction between cryptocurrency price volatility and the functions of currency, serving as a bridge between traditional and crypto finance. As the first stablecoin, USDT, launched by Tether in 2014, utilizes a US dollar asset reserve mechanism, achieving a 1:1 peg to the US dollar and operating on a blockchain. With the development of the cryptocurrency market, USDT's market capitalization reached US$157.74 billion as of June 30, 2025, accounting for approximately 62% of the global stablecoin market, making it the most important medium of exchange for cryptocurrency transactions. Its application scenarios have also expanded beyond crypto transactions into traditional finance, with increasing numbers of financial institutions and businesses adopting it as a cross-border payment tool. The structure of reserve assets has also evolved from solely the US dollar to a diversified portfolio encompassing crypto assets, gold, and corporate bonds, enhancing risk resilience while also reflecting market concerns about fiat currency devaluation. As a naturally cross-border payment tool, stablecoins, thanks to their decentralized nature, transcend the geographical limitations of traditional payment systems, enabling cross-border transactions at lower costs and higher efficiency. They offer convenient payment and savings solutions, particularly for residents in regions with weak financial infrastructure. However, World Bank data shows that 23% of cross-border stablecoin flows are not included in balance of payments statistics, posing a challenge to national and regional monetary sovereignty and capital controls. While diversifying reserve assets enhances stability, it also introduces new risks. In 2022, TerraUSD's market capitalization plummeted by $40 billion due to an algorithmic failure, exposing the systemic fragility of stablecoins without sufficient asset backing. (III) Regulatory Challenges and Solutions As an emerging financial instrument, stablecoins demonstrate tremendous development potential, leveraging advances in blockchain technology and growing market demand for digital currencies. Their decentralized and efficient nature makes them a strong competitor to traditional payment systems in the global financial system, particularly in cross-border payments. However, to realize this potential and ensure their long-term healthy development, stablecoins must overcome three core challenges: first, value stability and asset security, including inconsistent reserve asset management standards, technical vulnerabilities, and the risk of cyberattacks; second, regulatory complexity associated with cross-border circulation, such as difficulties in international regulatory coordination and the potential for illicit activities; and third, potential impacts on the traditional financial system, including a weakening of banks' lending capacity and the transmission of market volatility to traditional financial sectors. Facing these challenges, a balance must be struck between innovation and security, and between efficiency and stability. First, regulators should establish a comprehensive stablecoin regulatory framework, including rigorous qualification reviews of issuers and strengthened oversight of reserve assets (e.g., regular independent audits and transparent disclosure). Second, given the transnational nature of stablecoins, international regulatory cooperation must be strengthened. International organizations should collaborate on the development of unified standards and establish cross-border information sharing and joint risk prevention mechanisms. Finally, policymaking must balance innovation incentives with risk prevention. For example, regulatory sandboxes could be used to support technological research and development, while strengthening consumer protection and risk education. Only through this comprehensive approach can stablecoins overcome current obstacles and achieve robust development within the global financial system. mBridge and stablecoins represent the dual evolution of the "sovereign path" and the "market path," creating a distinct "competitive and cooperative" landscape in cross-border payments. On the one hand, differences in their technological and institutional logic (see Table 1) form the basis of competition. Stablecoins, based on public blockchains, smart contracts, and an open financial ecosystem, offer low barriers to entry and high programmability, making them more suitable for high-frequency, fragmented retail payment scenarios such as cross-border remittances and e-commerce settlements. However, their decentralized nature may undermine monetary sovereignty and regulatory transparency. In contrast, mBridge, relying on the central bank digital currency (CBDC) framework, emphasizes regulatory compliance and financial stability. Currently, it is primarily used for large-scale, wholesale cross-border clearing. While it reduces systemic risk, it offers limited flexibility. This divergence in scenarios creates potential substitution between the two at multiple payment tiers. Particularly in resource-constrained emerging markets, the trade-offs between access costs, sovereign control, and liquidity efficiency create a "one gain, the other lose" dynamic. On the other hand, ecosystem complementarity and functional differentiation create opportunities for collaboration. The two platforms' functional positioning is naturally complementary: stablecoins focus on high-frequency retail needs, such as personal remittances and small-value payments, while mBridge serves wholesale, large-value clearing, such as inter-central bank reserve transfers and multinational corporate settlements. This layered approach allows the two platforms to develop collaboratively at different payment tiers, rather than completely replace each other. As stablecoins gradually become compliant and mBridge's application scenarios expand, the potential for collaboration between the two platforms in areas such as liquidity support and technological interoperability will become increasingly apparent, jointly promoting the formation of a more efficient cross-border payment system.
05 Policy Suggestions for the Construction of my country's Cross-Border Payment System
First, deepen the construction of the main channels for the cross-border application of digital RMB. We should focus on promoting the application of digital RMB on the mBridge platform and strengthen its trade settlement function in countries and regions participating in the joint construction of the "Belt and Road" initiative, especially in the RCEP region. By improving supporting policy support, we will encourage more international financial institutions to access the mBridge system and build a cross-border payment network with digital RMB at its core. At the same time, combined with mechanisms such as bilateral local currency swaps, we will increase the proportion of RMB used in the international payment system.
Second, standardize and promote the development of stablecoins in Hong Kong. Relying on Hong Kong's status as an international financial center and the regulatory framework of the Stablecoin Ordinance, and under the premise that risks are controllable, support licensed financial institutions to pilot the issuance of stablecoins, which will be used preferentially in small-value, high-frequency payment scenarios such as cross-border e-commerce and labor remittances. At the same time, strengthen coordination with mainland supervision to ensure that capital flows comply with foreign exchange management requirements, and improve supporting regulatory mechanisms such as anti-money laundering and cross-border data flows.
Third, steadily promote the coordinated development of cross-border payment systems. With the digital RMB cross-border payment system (mBridge) as the core infrastructure, coordinate the development of various payment methods and build a layered and classified cross-border payment ecosystem. Support commercial banks to carry out digital RMB cross-border payment innovations in accordance with the law under the guidance of the central bank, and provide differentiated service solutions for transactions of different sizes. Strengthen cross-border payment supervision coordination, improve the risk monitoring and compliance management framework, and ensure the safe and efficient operation of the payment system.
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