The Dual-Track Evolution of Cross-Border Payment Systems: The Competitive Landscape of Currency Bridges and Stablecoins

Authors: Ren Yiying, Wang Jian, Zhu Yifan, Zhang Xuzheng, Source: International Finance

Abstract

Currently, the global cross-border payment system heavily relies on the “SWIFT+CHIPS” architecture, which faces issues such as low efficiency, weak regulation, and the political “weaponization” of payments. Against this backdrop, the mBridge project, promoted jointly by multiple central banks, and privately-led stablecoin solutions have emerged as two parallel innovative paths. The former relies on central bank credit and distributed ledger technology to build a cross-border CBDC peer-to-peer real-time settlement network; the latter achieves cost reduction and near-instant settlement for high-frequency, small-value payment scenarios through public blockchain. This article systematically sorts out the technical architecture, governance models, and application scenarios of both, revealing their complementary relationship between sovereign compliance and market efficiency. The research finds that the future cross-border payment system may present a “dual-track parallel” pattern: mBridge strengthens official settlement infrastructure, while stablecoins fill the gap in inclusive finance. The synergistic development of both will promote 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 a dual-layer architecture constituted by “SWIFT+CHIPS” (Society for Worldwide Interbank Financial Telecommunication + Clearing House Interbank Payments System). SWIFT, as the global interbank messaging communication system, primarily undertakes the function of information transmission, while fund clearing is completed through CHIPS. Since domestic U.S. banks can directly open accounts at the New York Federal Reserve Bank for settlement, while non-U.S. banks must indirectly access the CHIPS system through their correspondent banks in the U.S., this model has led to a multi-tiered and multi-link correspondent banking model, resulting in high costs for cross-border payments, delayed efficiency, and limited regulatory efficiency.

In recent years, the United States has repeatedly leveraged SWIFT and CHIPS to impose sanctions on other countries, highlighting the political risks of the cross-border payment system. The global exploration of alternative mechanisms has become increasingly urgent. Against this backdrop, the “Multilateral Currency Bridge” (mBridge), centered on Central Bank Digital Currencies (CBDC), and “Blockchain Stablecoins” issued by the private sector have emerged as two parallel paths. The former is a CBDC cross-border clearing network coordinated by the Bank for International Settlements (BIS), supporting multiple central banks to directly issue and exchange their respective CBDCs for cross-border payment settlements through a general platform based on distributed ledger technology (Song Shuang, 2024); the latter is a chain-based stablecoin issued by the private sector, typically fully collateralized by fiat currencies, government bonds, and other assets, relying on public blockchains to construct a decentralized cross-border payment network and bypass traditional financial intermediaries through technological means (Lu Minfeng et al., 2025). Although there are significant differences in technical architecture, governance logic, and applicable scenarios between the two, both aim to address the structural bottlenecks present in the traditional system.

This article evaluates the development principles, technical architecture, and application trends of two paths, mBridge and stablecoins, based on a systematic analysis of the operational mechanisms and bottlenecks of traditional payment systems. It further compares their institutional advantages and potential risks, and proposes policy recommendations for the construction of China's cross-border payment system.

01 The Innovative Driving Force of the Global Cross-Border Payment System

Currently, the global cross-border payment system primarily relies on the “SWIFT+CHIPS” framework, which is characterized by high centralization, dollar dominance, and complex hierarchies. It mainly faces the following three issues: First, inefficiency and high costs. The traditional correspondent banking model requires multiple nodes such as the initiating bank, intermediary banks, and receiving banks, along with different time zones, regulations, and systems, resulting in an average cross-border remittance taking 3-5 business days. Additionally, various links may charge fees, and foreign exchange conversions are accompanied by price differentials, making the overall transaction costs excessively high (Xue Xinhong et al., 2024), which is particularly detrimental to small payments and users in developing countries. Second, fragmented regulatory information and expanded compliance risks. Due to the dislocation chain formed by the SWIFT information flow while the funds flow through account transfers,

Regulatory agencies find it difficult to comprehensively grasp the transaction status and fund paths in real-time, facing huge challenges in anti-money laundering and anti-terrorist financing compliance reviews. Thirdly, the system is easily weaponized by geopolitical tools. The neutrality of SWIFT is being questioned. Historically, the United States has used its influence over the SWIFT and CHIPS systems to impose financial sanctions on other countries multiple times, such as excluding several Iranian banks from the SWIFT system, which had a significant impact on the Iranian economy; after the outbreak of the Russia-Ukraine conflict in 2022, some Russian banks were cut off from SWIFT.

02 mBridge: Central Bank-led Digital Currency Bridge Path

(1) Technical Architecture, Mechanism Principles and Development Significance

mBridge, as the world's first multilateral central bank digital currency (CBDC) cross-border payment platform, innovates through the fusion of distributed ledger technology (DLT) and CBDC, establishing an efficient, low-cost, and secure new paradigm for cross-border payments. Its core principle lies in utilizing the characteristics of distributed ledger technology and CBDC to build a decentralized cross-border payment network. In this network, the central banks or monetary authorities of various countries and regions participate as nodes, jointly maintaining a synchronized, real-time updated ledger. Each cross-border payment transaction is recorded in a digital format on the blockchain, ensuring the immutability, transparency, and traceability of transactions. Specifically, the mBridge platform connects the digital currency systems of various countries and regions' central banks or monetary authorities through the design of a “corridor network.” When conducting cross-border payments, commercial banks first convert their domestic or regional CBDC into deposit receipts (DR) on the platform, and then use blockchain technology to achieve peer-to-peer transfer and settlement. The entire process bypasses multiple intermediary bank steps in traditional cross-border payments, significantly shortening the transaction process, reducing transaction costs and time delays, while also enhancing the transparency and security of transactions.

The mBridge project follows the three main principles of “lossless, compliant, and interoperable,” ensuring that the monetary sovereignty of each country and region is not violated, while meeting the differentiated requirements of various countries and regions through an embedded regulatory module, and achieving seamless connectivity between different CBDC systems. These principles lay the foundation for the stable operation and wide acceptance of mBridge, enabling it to play an important role in the complex international financial environment.

mBridge is of significant importance for the internationalization of the Renminbi. Through the mBridge platform, the digital Renminbi can be more conveniently circulated and settled across borders, expanding its usage scope and market share in international payments, and enhancing the international status and influence of the Renminbi. For instance, under the framework of the “Belt and Road” initiative, China provides DLT infrastructure to developing countries such as Bangladesh and Egypt, exchanging technological assistance for an increase in their Renminbi reserve ratios. At the same time, mBridge also provides a platform for collaboration and communication for CBDCs in other countries and regions, promoting the diversification and balanced development of the global monetary system, and becoming a testing ground for the reform of the international monetary system.

(2) Project Progress and Application Results

As one of the largest CBDC cross-border payment pilot projects in the world, the mBridge project has made breakthrough progress from concept to implementation both domestically and internationally. Internationally, in 2022, the mBridge project completed the world's first pilot test based on real transaction scenarios, completing a total of 164 cross-border payments and foreign exchange synchronizations, with a settlement amount exceeding 150 million yuan. The Central Bank of Saudi Arabia became a full partner of the mBridge project in June 2024, and in September of the same year, it launched RMB oil settlement, marking a new phase in the pricing system for energy trade driven by digital currency. These projects validate the potential of mBridge in improving the efficiency of cross-border payments and reducing costs, demonstrating its feasibility and advantages in practical application.

In China, mBridge has been implemented in places such as Wenzhou and Huzhou in Zhejiang, Foshan in Guangdong, and Guangxi, facilitating cross-border RMB collection services for enterprises. Through the mBridge platform, the time for cross-border transactions has been significantly reduced; remittances that previously took 24 hours to arrive can now be received within 1 hour. Moreover, it avoids SWIFT telecommunication fees and agent bank charges, greatly improving the efficiency of cross-border payments, reducing transaction costs and exchange rate risks for enterprises, and providing a more convenient and efficient payment service for cross-border trade and investment, making it an important scenario for the internationalization of the RMB.

(3) Regulatory Challenges and Solutions

mBridge, as an innovative cross-border payment infrastructure, faces the following challenges in its further application and promotion globally: First, the core of mBridge lies in connecting CBDC systems in different countries and regions based on different technological architectures, which poses significant difficulties in ensuring seamless, secure, and efficient interactions between these heterogeneous systems. Any technical failure or upgrade from one party could impact the stability of the entire network. Second, mBridge involves multiple central banks or monetary authorities and regulatory agencies from various countries and regions, making it difficult to establish an efficient, fair, and widely accepted governance framework in terms of decision-making mechanisms, access standards, and cost-sharing. There are significant differences among central banks or monetary authorities in various countries and regions regarding CBDC design, data privacy, anti-money laundering and counter-terrorism financing, and capital flow management, and reconciling these aspects requires substantial human, material, and time costs. Third, mBridge provides near real-time cross-border settlement, which may accelerate capital flows and amplify effects on exchange rates and financial market volatility. During times of stress, rapid capital flight may exacerbate financial instability, and friction in connecting with the traditional financial system could introduce new systemic risk points.

The robust development of mBridge requires systemic solutions and international collaborative governance. On the one hand, mBridge will continue to strengthen its integration with other international payment systems and standards to enhance its interoperability and compatibility. For example, mBridge can connect with traditional payment networks such as the SWIFT system and CIPS system, building a “traditional + digital currency” dual-track infrastructure that creates complementary effects and jointly promotes 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 the regulatory framework for CBDCs, strengthen international cooperation and coordination, and establish a more unified, transparent, and efficient cross-border payment regulatory system. This will help mitigate financial risks, maintain financial stability, and provide a solid regulatory guarantee for the healthy development of mBridge.

03 Stablecoins: Technological Alternatives Driven by Market Efficiency

(1) Definition, Operating Mechanism, and Competitive Advantage

Stablecoins are an innovative monetary system design that is fundamentally different from traditional fiat currencies and highly volatile cryptocurrencies. Instead, they possess dual characteristics of traditional fiat currency value stability and the technological advantages of cryptocurrencies. The core mechanism of stablecoins can be summarized as follows: issued by the private sector, backed by 100% real assets as reserves. These assets can be a single domestic or foreign fiat currency, or a diversified portfolio of financial assets, such as government bonds, precious metals, or even other cryptocurrencies. On the technical level, the issuance and circulation system is constructed based on DLT, ensuring the transparency, immutability, and decentralization of transactions. Taking the regulatory framework for stablecoins in Hong Kong as an example, its institutional design is typical. The issuer, as a private entity, must reserve an equivalent amount of highly liquid real assets to support the issuance of stablecoins, such as HKD deposits, foreign exchange reserves, or AAA-rated bonds, and is subject to regular verification of reserve adequacy by a third-party auditing firm.

This design ensures that each stablecoin is backed by real asset reserves, allowing stablecoin holders to redeem their reserve assets at any time, thereby effectively preventing the risk of currency overissuance. When the reserve assets are fiat currencies, stablecoins essentially become a digital extension of fiat money, with their credit rating approaching that of sovereign currencies. Additionally, due to the characteristics of distributed ledgers, transactions of stablecoins possess limited anonymity; ordinary users' transaction information is protected by encryption, while regulatory authorities can obtain specific transaction traceability data through legal authorization, which protects the privacy of market entities while providing necessary oversight tools for judicial and regulatory bodies. Furthermore, the peer-to-peer transaction characteristics of distributed ledgers endow stablecoins with inherent advantages for cross-border payments, allowing them to break through traditional national borders and provide low-friction solutions for the international payment system.

(2) Development History and Risk Events

The birth of stablecoins aims to address the structural contradictions between the price volatility of crypto assets and the functions of currency, serving as a bridge between traditional finance and crypto finance. As the first stablecoin, USDT, launched by Tether in 2014, adopts a dollar asset reserve mechanism, achieving a 1:1 peg to the US dollar and operating on the blockchain. With the rise of cryptocurrencies

Market development, by June 30, 2025, the market capitalization of USDT reached 157.74 billion USD, accounting for approximately 62% of the global stablecoin market, making it the most important cryptocurrency trading medium. Its application scenarios have also expanded from crypto trading to traditional finance, being increasingly accepted by financial institutions and enterprises as a tool for cross-border payments. The structure of reserve assets has also evolved from a single US dollar to a diversified inclusion of crypto assets, gold, corporate bonds, etc., which not only enhances risk resistance but also reflects the market's concerns over the depreciation of fiat currencies.

As a natural cross-border payment tool, stablecoins break through the geographical limitations of traditional payment systems with their decentralized characteristics, enabling cross-border circulation with lower costs and higher efficiency, especially providing convenient payment and savings solutions for residents in areas with weak financial infrastructure. However, data from the World Bank shows that 23% of stablecoin cross-border flows are not included in international balance of payments statistics, posing challenges to monetary sovereignty and capital controls of countries and regions. At the same time, while diversification of reserve assets enhances stability, it also brings new risks - in 2022, TerraUSD collapsed with a market value of $40 billion due to algorithm failure, exposing the systemic vulnerabilities of stablecoins that lack sufficient asset backing.

(3) Regulatory Challenges and Solutions

Stablecoins, as an emerging financial instrument, demonstrate tremendous development potential due to advancements in blockchain technology and the growing market demand for digital currencies. Their decentralized and efficient characteristics position them as strong competitors to traditional payment systems in the global financial system, particularly in the area of cross-border payments. However, to turn this potential into reality and ensure their long-term healthy development, stablecoins must overcome three core challenges: first, the issues of value stability and asset security, including the lack of unified standards for reserve asset management, technical vulnerabilities, and risks of cyberattacks; second, the regulatory complexities arising from cross-border circulation, such as difficulties in international regulatory coordination and potential risks of illegal activities; and third, the potential impact on the traditional financial system, including the weakening of bank credit capacity and the transmission of market volatility to traditional finance.

In the face of the above challenges, it is necessary to seek a balance between innovation and security, efficiency and stability. First, regulatory agencies should establish a comprehensive regulatory system for stablecoins, including implementing strict qualification reviews for issuers and strengthening the regulation of reserve assets (such as regular independent audits and transparent disclosures). Secondly, given the cross-border nature of stablecoins, international regulatory cooperation must be strengthened, and unified standards should be developed through international organizations to establish cross-border information sharing and joint risk prevention mechanisms. Finally, policy-making should consider both innovation incentives and risk prevention, for instance, by supporting technological research and development through regulatory sandboxes while also enhancing consumer protection and risk education. Through this comprehensive approach, stablecoins can overcome current obstacles and achieve stable development in the global financial system.

04 Competitive Landscape of Currency Bridges and Stablecoins

mBridge and stablecoins represent a dual-track evolution of the “sovereign path” and “market path,” forming a distinct “competitive-cooperative landscape” in the field of cross-border payments.

On one hand, the differences in their technological and institutional logic (see Table 1) form the basis of competition. Stablecoins are based on public chains, smart contracts, and open financial ecosystems, featuring 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 characteristics may weaken currency sovereignty and regulatory transparency. In contrast, mBridge relies on the Central Bank Digital Currency (CBDC) framework, emphasizing regulatory compliance and financial stability, and is currently mainly used for large, wholesale-level cross-border settlements. Although it reduces systemic risk, its flexibility is weaker. This scenario differentiation creates potential substitution effects between the two across multiple payment tiers, especially in resource-constrained emerging markets, where the trade-off between access costs, sovereignty control, and liquidity efficiency constitutes a “this for that” dynamic.

On the other hand, ecological complementarity and functional differentiation create space for cooperation. The functional positioning of both is naturally complementary, with stablecoins focusing on high-frequency demand at the retail end, such as personal remittances and small payments; mBridge serves the wholesale end for large-scale settlements, such as interbank reserve transfers and multinational corporate settlements. This layered scenario allows both to develop collaboratively at different payment levels rather than completely replacing each other. As stablecoins gradually become compliant and the application scenarios of mBridge expand, the potential for cooperation in areas such as liquidity support and technical interoperability may further emerge, jointly promoting the formation of a more efficient cross-border payment system.

05 Policy Suggestions for the Construction of China's Cross-Border Payment System

First, deepen the construction of the main channel for the cross-border application of the digital RMB. Focus on promoting the application of the digital RMB on the mBridge platform, enhancing its trade settlement function in countries and regions participating in the Belt and Road Initiative, especially in the RCEP region. By improving supporting policies, encourage more international financial institutions to access the mBridge system and build a cross-border payment network centered around the digital RMB. At the same time, in conjunction with bilateral local currency swap mechanisms, increase the proportion of RMB usage in the international payment system.

Second, standardize and promote the development of stablecoins in the Hong Kong region. Relying on Hong Kong's position as an international financial center and the regulatory framework of the “Stablecoin Ordinance”, support licensed financial institutions to pilot the issuance of stablecoins under the premise of controlled risks, prioritizing their application in small, high-frequency payment scenarios such as cross-border e-commerce and remittances. At the same time, strengthen coordination with mainland regulatory authorities to ensure that fund flows comply with foreign exchange management requirements, and improve supporting regulatory mechanisms for anti-money laundering and cross-border data flows.

The third is to steadily promote the coordinated development of the cross-border payment system. With the digital RMB cross-border payment system (mBridge) as the core infrastructure, various payment methods will be developed in a coordinated manner to build a layered and classified cross-border payment ecosystem. Support commercial banks to carry out digital RMB cross-border payment innovation in accordance with the law under the guidance of the central bank, providing differentiated service solutions for transactions of different scales. Strengthen the coordination of cross-border payment supervision, improve the risk monitoring and compliance management framework, and ensure the safe and efficient operation of the payment system.