Stablecoins and Central Bank Digital Currencies: New Pipelines for the Digital Payment System

Stablecoins and Central Bank Digital Currencies: The New Pipeline of Digital Payment Systems

In April 2026, the Hong Kong Monetary Authority (HKMA) issued the first batch of stablecoin issuer licenses, marking the transition of stablecoins from the experimental stage to regulated, scaled application. This event is significant because, through reserve assets and settlement functions, stablecoins are becoming embedded in market infrastructure and are connected to short-term securities, bank balance sheets, and liquidity conditions. The story of digital payments has long transcended the realm of cryptocurrency or fintech, becoming a core issue in the digital transformation of the global financial system.

Industry Background: Three Forms of Digital Payments

The digital currencies currently under discussion mainly include three forms: regulated stablecoins, tokenized commercial bank deposits, and central bank digital currencies (CBDCs). Although they all appear to be digital currencies on the surface, their risks and market impact depend on the issuer, asset backing, redemption mechanism, settlement rails, and the ultimate locus of control.

The complete chain from issuance to settlement—issuer → backing assets → redemption → settlement rails → final control point—constitutes the "pipeline perspective" for understanding the digital payment system. Based on this perspective, the world presents two distinct development models: the U.S.-style bottom-up model, in which private stablecoins develop first and regulation follows; and the Mainland China-style top-down model, in which innovation is advanced through public digital rails. Hong Kong, meanwhile, has become the bridgehead where the two models converge.

The U.S. Model: Stablecoins First, Regulation Follows

The U.S. digital payment development path is a typical bottom-up one: private innovation comes first, and regulation fills in later. Stablecoins have gained market favor with 24/7 transferability, faster cross-border settlement speeds, and compatibility with tokenized activities on shared digital infrastructure. According to the International Monetary Fund (IMF), stablecoin issuance has doubled over the past two years; a Federal Reserve staff report shows that in 2025, stablecoin market capitalization grew by about 50%, with trading volumes also surging.

In July 2025, the U.S. GENIUS Act officially became law, establishing the first federal regulatory framework for payment stablecoins, specifying qualified issuers, reserve standards, redemption, and regulatory requirements. At the same time, the U.S.'s lukewarm attitude toward a retail CBDC has further supported the development space for privately issued digital dollars.For financial professionals, the importance of stablecoins lies in their interaction with banking, liquidity, and market structure. On the banking side, stablecoins have sparked discussions about deposit migration, funding stability, and the shift of transaction balances from traditional deposits to blockchain infrastructure. Federal Reserve analysis explicitly views stablecoins as a potential challenge to deposits, credit, and intermediation functions, although the impact is neither immediate nor one-way. On the capital markets side, research by the Bank for International Settlements (BIS) finds that inflows into dollar stablecoins lower the yield on three-month U.S. Treasury bills (which serve as reserve assets for stablecoins) by a few basis points, with a larger effect during periods of Treasury scarcity. Stablecoins will not replace banks in the foreseeable future, but they are increasingly influencing the areas that regulators and market participants care most about: settlement, liquidity, and market structure.

Mainland China’s Model: Restricting Private Crypto, Building Public Rails

Mainland China’s digital payment path is almost a mirror image of the United States. Since September 2021, when the People's Bank of China (PBoC) issued a notice classifying cryptocurrency-related business activities as illegal financial activities, mainland China has adopted a state-coordinated approach, advancing innovation within strictly managed monetary and financial boundaries.

At the same time, Beijing has not rejected the underlying advantages of digital currency; instead, it captures them through public infrastructure. The digital yuan (e-CNY) has become the world's largest CBDC pilot project. As of November 2025, the e-CNY had processed more than 3.4 billion transactions, totaling approximately $2.3 trillion. In January 2026, a new framework pushed the e-CNY to shift from a pure cash-like instrument to a digital currency closer to deposits—authorizing balances held by commercial banks to be treated as bank deposit liabilities and to earn interest at prevailing deposit rates. This does not guarantee mass adoption, but it significantly changes the e-CNY's competitive position relative to non-interest-bearing private alternatives.

The most instructive part of the mainland China model lies in cross-border applications. In May 2024, the Hong Kong Monetary Authority and the People's Bank of China expanded the cross-border e-CNY pilot, allowing Hong Kong residents to open and top up e-CNY wallets locally through the Faster Payment System (FPS)—the world's first connection between a fast payment system and a CBDC system. Meanwhile, the multi-central bank digital currency bridge project (mBridge) reached the minimum viable product (MVP) stage in June 2024 for cross-border payments and foreign exchange settlement. According to analysis by the Atlantic Council, as of January 2026, mBridge had processed more than 4,000 cross-border transactions totaling approximately $55.49 billion, with e-CNY accounting for over 95% of settlement volume. The e-CNY story has moved beyond domestic pilots into cross-border settlement infrastructure, and these public rails may promote the internationalization of the renminbi in the future.

The EU's Public Currency Path## 欧盟的公共货币路径

Europe has chosen a different path in public digital currency—the digital euro. Like China, the EU still places central bank money at the core of its digital strategy, but its motivations are more centered on sovereignty, privacy, and payment resilience than on operational promotion. The European Central Bank (ECB) completed the preparation phase of the digital euro in 2025, and has stated that if legislation passes in 2026, a pilot could be launched in 2027, with the Eurosystem potentially ready to issue the digital euro by 2029.

This means the EU offers another model for the development of public digital currency: neither market-led as in the United States, nor operationally leading as in China, but increasingly driven by strategic autonomy and concerns about dependence on non-European payment providers. However, scale and government backing will not automatically translate into mainstream adoption. Usability, merchant acceptance, and user incentives still matter, determining whether policy-driven and controlled use cases can translate into broad adoption.

香港：公私数字货币的交汇桥头堡

Hong Kong's distinctiveness lies in being one of the few places where public-sector digital currency experiments and private stablecoin regulation advance side by side. It is both a frontier corridor for cross-border CBDC connectivity and an emerging regulated issuance hub for private stablecoins. This allows the models of the United States and mainland China to be presented in parallel.

On the public track, Hong Kong has become the clearest external corridor for mainland China's digital currency model. The linkage between FPS and e-CNY allows Hong Kong residents to open and top up e-CNY wallets locally, while the mBridge project further strengthens the cross-border capabilities of multilateral central bank digital currencies. On the private side, the HKMA issues stablecoin licenses, making Hong Kong a pioneer in the regulatory sandbox. This dual role gives Hong Kong a unique position in the evolution of global digital payment infrastructure.

对金融体系的影响

结算效率与跨境支付

Stablecoins and CBDCs are jointly driving settlement mechanisms toward 24/7, instant processing. Traditional cross-border payments often take days and are completed through correspondent banking networks, whereas stablecoins and CBDC platforms such as mBridge can reduce settlement time to seconds. The integration of FPS in the e-CNY pilot demonstrates the feasibility of merging public payment rails with existing fast payment systems.

金融普惠

Digital payment technology has the potential to lower the barriers to financial services. In Hong Kong, the FPS-e-CNY linkage enables unbanked or underbanked residents to use central bank digital currency; stablecoins provide low-cost remittance channels for cross-border workers. However, the realization of financial inclusion effects still depends on user interfaces, merchant acceptance, and education outreach.

银行业竞争与资金结构### Banking Competition and Funding Structure

The substitution effect of stablecoins on bank deposits has drawn regulatory attention. Federal Reserve analysis notes that if a large volume of transaction balances shifts from commercial bank deposits to blockchain infrastructure, banks could face funding instability, which in turn could affect credit supply. On the other hand, banks are also exploring tokenized deposits to remain competitive in the digital payments era. The design of CBDCs also needs to weigh the impact on financial intermediaries, for example by using interest-bearing mechanisms and holding caps to prevent large-scale deposit flight.

Compliance Costs and Risk Management

The introduction of digital payments brings new compliance challenges. Stablecoin issuers must meet requirements for reserve transparency, anti-money laundering (AML), and know-your-customer (KYC); CBDCs, meanwhile, need to design mechanisms to prevent financial crime and abnormal capital flows. Cross-border platforms such as mBridge also need to address legal differences across multiple jurisdictions.

Challenges Ahead

Data Privacy and Security

Both CBDCs and stablecoins involve the collection and processing of user transaction data. In the mainland China model, the controlled anonymity of e-CNY aims to balance anti-money laundering with privacy; the EU's digital euro emphasizes privacy protection but must strike a balance with law enforcement needs. Cybersecurity risk is also critical—if digital payment infrastructure comes under attack, it could trigger systemic risk.

Technology Integration and Interoperability

The coexistence of different digital payment systems brings interoperability challenges. U.S. stablecoins, China's e-CNY, the EU's digital euro, and various countries' tokenized deposits are each based on different technical standards and platforms. Achieving seamless cross-system interaction requires the development of global technical specifications and governance frameworks. mBridge itself is an attempt, but expanding participation still requires coordination among all parties.

Regulatory Uncertainty

Global regulation of stablecoins and CBDCs is still evolving dynamically. The U.S. GENIUS Act has established a federal framework, but state laws still need to be reconciled; the EU's Markets in Crypto-Assets Regulation (MiCA) imposes strict rules on stablecoins, but the digital euro is still in the legislative stage; mainland China completely bans private crypto, but CBDC rules are still being adjusted. Regulatory differences increase the complexity and compliance costs of cross-border operations.

Future Outlook

Over the next three to five years, digital payment infrastructure will accelerate its convergence, but no single model will dominate. The United States will continue to grow its regulated stablecoin ecosystem and may explore private-sector innovation in tokenized deposits; mainland China will build on e-CNY to further expand cross-border mBridge applications and promote the internationalization of the RMB; the EU will steadily advance the digital euro with an emphasis on strategic autonomy.

Hong Kong, as a bridgehead, will play a role similar to a "regulatory laboratory," providing real-world scenarios for the coexistence and interoperability of public and private digital currencies. At the same time, the development of tokenized securities, smart contracts, and embedded finance will increase the market's reliance on the "cash leg" settlement rail—that is, the digital payment pipeline.For financial practitioners, the most critical competition will revolve around payment rails, governance models, interoperability standards, and network effects—whoever becomes the preferred cash settlement layer for tokenized assets, collateral, and cross-border transactions will dominate the digital financial system.

The new pipeline for digital payments has already been laid, and its final form depends on how regulators, market participants, and technology developers jointly shape the future of this financial infrastructure.