Foreign trade × stablecoin: Mirage or a promising future?

Author: Ben Sha, Li Shuo

A research report from Huatai Securities indicates that "in Yiwu, the world small commodities center of China, stablecoins have become an important tool for cross-border payments. Blockchain analytics firm Chainalysis estimates that in 2023, the on-chain stablecoin flow in the Yiwu market will exceed $10 billion." Although the claim of "$10 billion" is yet to be verified, the media coverage and public discourse it has generated further add to the imaginative space for the application scenarios of stablecoins, which are currently under global attention.

What is the real usage of stablecoins in China's foreign trade industry? What challenges and risks do they face from commercial and compliance perspectives? Can they become the mainstream payment method for foreign trade in the future? This article will elaborate from the perspective of compliance researchers and provide compliance suggestions for relevant practitioners concerned about the crypto market and stablecoin topics.

I. Challenges Galore: **** The Real Issues of Cross-Border Payments, **** The Current State of Stablecoin Settlements

Currently, cross-border e-commerce faces a series of issues in the payment settlement process.

Traditional payment methods are costly and involve lengthy operation chains. Taking PayPal and Stripe as examples, the platform fees generally range from 3% to 5%, with charges for Hong Kong entities even reaching 4.4%. In addition to hidden costs such as currency conversion losses and intermediary fees, the actual payment costs for enterprises often exceed 10% of the transaction amount, placing significant pressure on small and medium-sized enterprises, which already have limited profits.

At the same time, businesses must also cope with the numerous restrictions of multi-country regulations in the payment process, especially compliance requirements related to anti-money laundering (AML), know your customer (KYC), and data privacy. The mainland currently strictly prohibits businesses from using stablecoins for cross-border payments; although Hong Kong has passed the "Stablecoin Ordinance" in 2025, which establishes clear regulations for issuers, reserve assets, and auditing mechanisms, it similarly prohibits stablecoins from providing services to mainland users.

The security of cross-border payments also poses concerns. According to research by the World Economic Forum, losses due to payment fraud amount to billions of dollars globally each year. Some countries are trying to improve compliance efficiency through standardized data systems.

In addition, different markets have vastly different preferences for payment methods, and companies must support a variety of channels, including wire transfers, credit cards, digital wallets, and local payment systems.

Feedback from frontline practitioners further confirms this situation. The author interviewed a Chinese cross-border trader settled in Paris, who stated that he is accustomed to using USDT for payments in his daily business, which is more efficient compared to traditional payment methods. However, this is limited to smaller amounts (usually less than ten thousand US dollars) for certain B-end remittances. Additionally, when funds need to enter or exit some regions with strict regulatory restrictions, it still requires completion through CEX or familiar OTC channels.

It is worth mentioning that Binance has just released an eight-year review, which states that its payment business has cumulatively processed 230 billion U in funds, primarily for cross-border remittances. It is still unknown how much of this is trade-related, but it undoubtedly plays an important channel role in cross-border payments.

In mainland China, practitioners' understanding and use of stablecoins are still at a primary stage. One interviewee had heard of stablecoins but had never applied them in actual business; another was completely unaware of the concept of stablecoins, and companies still primarily use PayPal or Lianlian Pay as their settlement tools. This indicates that the penetration rate of stablecoins in the domestic market is still very low, with the main usage concentrated among overseas Chinese practitioners and businesses or individuals with a higher acceptance of technology, and has not yet formed a scaled application.

At the current stage, stablecoin payments in cross-border trade are more like a potential solution for the future, and there is still some distance from becoming a mainstream solution. For stablecoins to truly play a role, it still relies on a series of systemic changes, such as regulatory coordination, financial infrastructure upgrades, and internal education within the industry.

So, based on the present and looking to the future, what positive impacts will stablecoins have on foreign trade?

**2. The Rise of Stablecoins: ****The Most Valuable Cryptographic Tool in Cross-Border Settlements

The value of stablecoins is anchored to specific assets (such as fiat currency, commodities, or other crypto assets), with the core characteristic being price stability. The most prominent among them is fiat-collateralized stablecoins, which are backed by fiat currencies (such as USD and EUR) as reserve assets. For every 1 unit of stablecoin issued, there is an equivalent (or excess) fiat currency reserve behind it, with the reserves held by third-party institutions and audited regularly to ensure a "1:1 peg". For example, Tether (USDT, launched in 2014) and USD Coin (USDC, launched in 2018). These tokens are supported 1:1 by cash and short-term U.S. Treasury bonds.

2.1 Efficient, economical, and inclusive: The theoretical advantages of stablecoins

Stablecoin payments theoretically have certain advantages compared to current mainstream foreign trade remittance methods such as bank wire transfers relying on the SWIFT system and third-party electronic payment platforms.

1. Stablecoins are more efficient. For example, the most commonly used bank wire transfer method goes through multiple stages such as "remitting bank → intermediary bank → receiving bank," relying on bank working days (not 24-hour operation), with a settlement period usually of 3-5 days (or even longer, especially when it involves emerging markets). In contrast, transferring using stablecoins based on blockchain networks does not require intermediaries; transactions are confirmed in real-time on-chain, and the blockchain network operates 7×24 hours, unaffected by holidays or time zone restrictions.
2. The cost of stablecoins is lower. The costs of wire transfer include the sending bank's fees, intermediary bank fees, and exchange rate conversion losses, while stablecoin payments only need to bear the blockchain network's Gas fees (i.e., on-chain transfer fees), which are usually about one-tenth of bank fees, and the exchange rate is directly pegged to fiat currency (e.g., 1 USDT = 1 dollar), almost with no premium loss. This has advantages for both large and small cross-border remittances.
3. Stablecoins are more inclusive. According to World Bank data, approximately 1.7 billion adults worldwide do not have a bank account, and in Africa, about 60% of the population is unbanked. Stablecoins can be used with just a digital wallet; users can download a wallet app on their smartphones to complete transfers and receive payments, which is particularly suitable for developing countries with weak financial infrastructure.

Higher efficiency, faster returns, and lower costs can directly enhance a company's survival and expansion capabilities in the highly competitive and low-margin cross-border e-commerce industry. It is precisely because of the potential to provide such advantages to enterprises that stablecoins are experiencing rapid development globally.

2.2 Flourishing and Growing, Increasing in Scale

An article from the ECONOFACT website mentions that by early 2025, the market value of stablecoins is expected to be around $250-260 billion. Stablecoins currently handle over $15 billion in transactions daily, and the market generally predicts that over the next 5-10 years, the market value of stablecoins will achieve several times growth, with one of the most important application scenarios being cross-border trade and payments.

In Hong Kong, the "Stablecoin Regulation" is set to take effect on August 1, 2025, clearly designating cross-border payments and remittances as one of the application scenarios for stablecoins, emphasizing its ability to reduce cross-border settlement times "from days to minutes."

In the United States, the GENIUS Act defines "Payment Stablecoin" as a digital asset that can be used for payment and settlement, clearly including it in the category of cross-border payment applications.

Major tech giants are also vying to enter this emerging market. Domestically, JD.com and Ant Group are striving to issue offshore RMB stablecoins, aiming for compliance in Hong Kong to facilitate exporters to receive payments in RMB and reduce reliance on the US dollar.

The United States, much like the craze for credit cards in the 1960s and 1970s, is seeing an increasing number of financial institutions actively engaging in stablecoin business as the regulatory framework for stablecoins gradually takes shape – from PayPal launching its own stablecoin PYUSD to Visa and Mastercard integrating stablecoins into their payment networks.

The future is promising, and the prospect of stablecoins being widely used in cross-border trade seems very appealing. However, what difficulties and challenges does the use of stablecoins in cross-border trade face at this stage, and what should the pioneers pay attention to?

3. Concerns: Risks and Challenges of Stablecoin Settlement

3.1 Compliance Concerns

First is whether it can be used.

For the behavior of settling foreign trade payments with stablecoins, the law does not stipulate that it should be subject to administrative penalties or criminal penalties, and only stipulates that the contract is a "void contract", meaning it is not binding on both parties, and both parties do not have a legal obligation to perform the contract. However, at the same time, the property rights of the rights holder over stablecoins and other virtual currencies are recognized by law, which has been supported by multiple judicial documents from the Shanghai courts. **

For this reason, the answer to the first question is "can". Furthermore, due to the convenience, anonymity, and difficulty of regulation associated with stablecoins, they have actually been used in a large number of underground industry transactions.

In this regard, the "Notice on Further Preventing and Dealing with Risks of Virtual Currency Trading Speculation" issued by the People's Bank of China and ten other departments in September 2021 pointed out that "stablecoins do not have the same legal status as fiat currency and cannot circulate as currency in the market." Furthermore, it stated that "all virtual currency-related activities, including virtual currency exchange, buying and selling virtual currency as a central counterparty, providing matching services for virtual currency transactions, token issuance financing, and trading of virtual currency derivatives, are illegal financial activities and are strictly prohibited, and must be resolutely banned in accordance with the law."

At the same time, the "Stablecoin Ordinance" that took effect in the Hong Kong Special Administrative Region on August 1 explicitly stipulates a licensing system for fiat-pegged stablecoin issuers, meaning that applicants who obtain a license can legally issue fiat-pegged stablecoins in Hong Kong, promoting financial innovation while maintaining financial stability, marking an important step for Hong Kong in the field of digital assets.

In summary, although activities related to stablecoins are subject to stricter restrictions in the mainland, Hong Kong's legislative innovations have opened a crucial window for the development of stablecoins in China. Foreign trade enterprises can see a path for the compliant use of stablecoins for cross-border settlement through this window, which will be discussed in detail in the final part of the article.

3.2 Costs Outside of Transactions

Secondly, there are hidden costs associated with trading using stablecoins.

At present, when the infrastructure for stablecoins and fiat currency exchange channels is not yet mature, there may not be much advantage in cross-border payments in developed economies, and the cost of exchanging fiat currency may even be higher than traditional channels.

The operating costs of foreign trade enterprises are not limited to transaction fees, exchange rate differences, etc. For example, proof of transaction history and credit certificates required for bank loans may be difficult for companies that choose to pay with stablecoins to provide, due to the official qualification that "activities related to virtual currency are considered illegal financial activities" (from the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading and Speculation").

In addition, the export tax rebate policies available through traditional methods do not benefit stablecoin payments; the application for exhibition booths at import and export exhibitions also requires bank statements generated by traditional payment methods.

All of the above factors have led to the cost of stablecoin payments being higher than traditional methods outside of transactions.

3.3 "Black Swan" and the Impact of Geopolitics

Finally, there is the risk of the stablecoin itself.

Stablecoins, as virtual currencies, lack the endorsement of national credit provided by central banks. Therefore, in the event of significant unexpected situations involving the issuing party or regulatory bank, instances of "decoupling" (unable to exchange 1:1 with the corresponding fiat currency) are not uncommon. For example, the FDUSD decoupling incident that occurred in April this year.

On April 2 at 11 PM, Tron founder Justin Sun held a press conference stating that the issuer of the stablecoin FDUSD, FDT, was insolvent. As a result, FDUSD experienced a severe decoupling, with its price on Binance dropping to a low of 0.87 against USDT and falling to as low as 0.76 against USDC. As panic spread, some users chose to sell at a discount. However, ultimately, with Binance founder He Yi speaking out to refute the rumors, the price of FDUSD rebounded to 0.987 USDT.

The ever-changing geopolitical landscape has cast a shadow over the stability of stablecoins. The most widely circulated and used dollar stablecoins are issued by American companies, making the U.S. government's "on-chain enforcement authority" a real threat to the assets of stablecoin holders.

The Russian cryptocurrency exchange Garantex is a typical case. The exchange was sanctioned by the U.S. Treasury's Office of Foreign Assets Control (OFAC) in April 2022, and on March 6, Tether (the issuer of USDT) directly froze all of its approximately 28 million USDT, involving multiple Garantex-associated wallets, forcing the exchange to suspend all trading and withdrawal activities and issue asset risk warnings to Russian users.

Overall, when using stablecoins for cross-border trade settlement domestically, despite the theoretical conveniences, the actual risks and hidden costs are higher than traditional remittance methods. Under the conditions that comply with foreign exchange control policies and anti-money laundering policies, stablecoins can be used as an "auxiliary means" for cross-border settlement, but they should not become the main channel or the only solution. When using them, it is essential to prepare alternative plans, transaction audits, and ensure transparency of the capital chain to reduce the probability of being "mishit".

IV. Promising Future:** Outlook on Domestic Stablecoin Cross-Border Settlement**

So what is the future outlook for using stablecoins for cross-border trade settlement domestically? Our judgment is optimistic.

From a market perspective, faster, cheaper, and more efficient settlement methods obviously align more with the actual interests of foreign trade enterprises. Whether it's small merchants in Shenzhen and Yiwu or medium-sized factories with overseas clients, everyone hopes for quicker returns and lower costs. This market demand is objectively present and is the biggest driving force behind the acceptance of stablecoins.

From a policy perspective, stablecoins also imply the great power game behind them. Currently, the most widely circulated stablecoins globally (such as USDT and USDC) are basically pegged to the US dollar, essentially extending the influence of the dollar in global payments through blockchain technology, which indirectly reinforces the dollar's hegemony and global demand for US Treasury bonds. To this end, the United States, through an increasing number of law enforcement agencies and judicial assistance mechanisms, frequently requests stablecoin issuers to freeze assets in "sensitive wallets" to maintain its financial hegemony and national interests.

This is also what we have been emphasizing, China must expedite the exploration and issuance of stablecoins, essentially to seize the "sovereign control on the chain" and achieve autonomous control of stablecoins.

As a domestic enterprise, using USD stablecoins will face two major risks. First, when conducting business with certain sensitive countries or clients, it is easy for others to analyze the transaction paths and fund flows through on-chain data. Once connected to an on-chain tracking system, upstream and downstream partners, payment frequency, and even project background may be exposed. Second, there are on-chain sanctions from the United States, for example, if Tether receives a letter of assistance from U.S. law enforcement agencies, they can freeze funds on-chain with one click, which is a risk that Chinese enterprises cannot accept at all.

Therefore, **Hong Kong's role will become increasingly key. It is not only a "testing ground" for policy innovation but is also becoming a "stronghold" for China to explore the cross-border use of stablecoins. For example, a foreign trade enterprise can choose to establish a company in Hong Kong, open an account, exchange the received stablecoins for Hong Kong dollars or US dollars at a locally compliant exchange or OTC service provider, and then safely and compliantly flow back to the mainland through bank channels. This entire process is currently executable, compliant, and more controllable.

Ultimately, this trend is likely to evolve into a "dual-track system": stablecoin settlements through compliant channels provided by financial institutions will coexist alongside traditional settlement methods in the long term, complementing each other. For customers with high requirements for settlement timeliness, smaller amounts, and integration with digital platforms, stablecoins may become the preferred choice; whereas for traditional customers with larger amounts, strict risk control, and strong reliance on banks, wire transfers will remain mainstream. However, overall, as technology matures and regulations become clearer, the proportion of stablecoins in cross-border settlements will gradually increase, becoming an important part of the future payment system.

This is also one of the reasons why Chinese-funded companies and technology companies frequently apply for licenses in Hong Kong. Where the users' demands are, their businesses will be.

Therefore, the cross-border settlement of stablecoins**, although still constrained by domestic regulatory policies and facing "twists and turns on the road" in the short term, has a relatively bright future in the near or distant future**. Golden wings spread wide, quietly waiting for the wind to come.