Can Cross-border Payment Pass really change the cross-border payment landscape in Hong Kong?

Introduction

On June 22, 2025, the "Cross-border Payment Pass" (CBPC) jointly launched by the People's Bank of China and the Hong Kong Monetary Authority was officially launched. This system realizes the direct interconnection between the mainland's online payment interbank clearing system (IBPS) and Hong Kong's "FPS" (FPS) for the first time, shortening the cross-border remittance time from several days in the past to a few seconds now, reducing the handling fee by more than 50%, and supporting direct settlement between RMB and Hong Kong dollars. For lawyers like us who focus on compliance in the Web3 field, does this financial infrastructure led by the "national team" provide an efficient new channel for enterprises to develop in Hong Kong, or does it foreshadow a compliance reconstruction: a deep game between efficiency and supervision in the field of cross-border payments?

How does Cross-border Payment Pass break the dilemma of traditional payment?

(I) Efficiency Revolution: Clearing Transition from “Days” to “Seconds”

Traditional telegraphic transfers rely on SWIFT multi-level clearing, and it takes 1-3 days to arrive; while Cross-border Payment Pass is directly connected to the Mainland Online Payment Interbank Clearing System (IBPS) and the Hong Kong Fast Payment System (FPS), achievingsecond-level arrival. In terms of fees, the traditional model usually charges 0.1% + telegraph fee, while Alipay currently implements 0 fee. In terms of operation, Alipay does not require SWIFT code filling and supports one-click remittance via mobile banking, which greatly improves efficiency. (II) Direct Currency Exchange + Scenario Whitelist Direct exchange of RMB and HKD does not constitute "disguised foreign exchange trading", avoiding the risks of Article 45 of the Foreign Exchange Administration Regulations. In terms of scenario management, Alipay adopts a whitelist mechanism: including the "Southbound Facilitation Remittance Business" in which domestic residents remit money to bank accounts in Hong Kong, with the option of remittance in RMB, or receipt of RMB or HKD; the "Northbound Facilitation Remittance Business" in which Hong Kong residents remit money to bank accounts in the Mainland, with the option of initiation in HKD or RMB, or receipt of RMB; and the "Two-way Cross-border RMB Payment Business" between individuals and institutions, such as payment for studying abroad, payment for public utilities, medical treatment, salary and subsidy payment, etc., with the option of bilateral local currency or bilateral RMB remittance. Mainland participating institutions handling cross-border payment services shall comply with the relevant business management regulations for cross-border funds settlement, perform compliance requirements for anti-money laundering, anti-terrorist financing and non-proliferation financing in accordance with the law, establish and improve the risk monitoring mechanism for cross-border payment services, improve risk prevention capabilities, strengthen monitoring of suspicious transactions, and ensure the smooth and orderly development of business.

Cross-border payment services vs. stablecoins

(I) Direct comparison of efficiency and cost

Cross-border payment services have realized the cross-border payment capabilities of "quasi-real-time arrival" and "low-cost remittance" for the first time in the legal currency system - second-level settlement, zero telegraph fees, and a reduction in handling fees of more than 50%. This efficiency and cost advantage directly matches the core advantages that stablecoins (such as USDT and USDC) have long claimed, namely, no need for intermediaries, fast transfers, and cost savings. The emergence of Cross-border Payment will undoubtedly squeeze the living space of stablecoins in terms of pure legal currency exchange and transfer efficiency. When the compliance path can provide services in seconds and almost free of charge, the motivation of users, especially ordinary users and enterprises, to use stablecoins for simple cross-border transfers may be greatly weakened. (II) Huge differences in compliance Compared with efficiency, the difference in compliance is the fundamental difference between the two. As a "national team" product with a good pedigree, Cross-border Payment is naturally embedded in the existing financial regulatory framework, and users and institutions have no additional compliance concerns when using it. Cryptocurrencies or stablecoins are currently facing a changing regulatory environment around the world. In Hong Kong, although the policy is relatively open, the special regulatory framework for the issuance and trading of stablecoins has not yet been fully implemented, and there is policy uncertainty. The use of cryptocurrencies for cross-border payments poses extremely high compliance risks for enterprises, especially those in the financial and trade sectors that are subject to strong regulation. However, on the other hand, cross-border payment only supports the application of some small-amount scenarios. In marginal, non-standard or Web3 native payment scenarios, stablecoins still have irreplaceable flexibility and technical advantages. From the trend point of view, cross-border payment is expected to gradually expand its applicable scenarios: starting from the current person-to-person (P2P) application, it will gradually expand to diversified cross-border fund usage scenarios such as person-to-institution (P2B), institution-to-institution (B2B), and institution-to-consumer (B2C). Once business-to-business (such as cross-border settlement, supply chain payment, project financing, etc.) is opened, the competition between cross-border payment and stablecoin will become more intense, and compliance advantages may become the decisive factor.

Legal risks and legal compliance behind cross-border payment

The launch of cross-border payment is not only a technical upgrade, but also a deep reshaping of the compliance system. As a "national-level" cross-border payment infrastructure jointly built by the People's Bank of China and the Hong Kong Monetary Authority, the legal challenges behind it are by no means as simple as the expansion of small-amount payments. Every transaction and every access node may trigger systemic legal issues such as compliance risks, anti-money laundering obligations and even regulatory arbitrage space.

(I) Legal risks of using the Cross-Border Payment System to “withdraw funds”

For mainland residents who wish to legally transfer virtual assets or overseas funds back to the mainland (i.e. “withdraw funds”), the current Cross-Border Payment System mechanism is not applicable and there are obvious legal risks. According to the current system, the “northbound remittance” (i.e. remittance from Hong Kong to the mainland) of the Cross-Border Payment System is subject to the prerequisite of “remittance from Hong Kong residents to mainland residents”. In other words, if you are a mainland Chinese resident, even if you hold a legally opened bank account in Hong Kong, it is difficult to realize the remittance operation to the mainland bank card through the “FPS” system. The system will impose restrictions in the identity recognition, user matching and other links.

Some people may propose so-called "workarounds", such as: "I can remit the cashed funds to a local friend in Hong Kong, and then he will use the cross-border payment channel to transfer the money to my mainland account." It seems feasible, but this kind of "transfer on behalf of" behavior actually constitutes false transactions or circumvention of regulatory operations , suspected of bypassing the transaction authenticity review and anti-money laundering mechanism, and there are obvious compliance risks. Although the cross-border payment channel has not yet conducted a transaction-by-transaction review of business background materials at the technical level, this does not mean that individuals or institutions can circumvent the principle of real transactions. Regulatory agencies always retain the power of post-review and suspicious transaction tracing . Once it is determined that the supervision of funds entering and leaving the country is circumvented by improper means, not only the relevant funds may be frozen, but also administrative penalties or criminal investigations may be triggered.

(II) Risk Control Behind the Small-amount Priority of Cross-border Payment

Cross-border Payment chooses to start with small amounts, which essentially puts the system into a "regulatory sandbox" with controllable risks. From the perspective of compliance logic, small-amount transactions naturally reduce the pressure of anti-money laundering (AML) and counter-terrorism financing (CFT), because the scale of a single fund is limited and each transaction is bound to a real scenario. Even if abnormal transactions occur, their social harm and systemic risks are within controllable range.

For regulators, this is a stress test. By observing the fund flow patterns of massive small transactions, the anti-money laundering monitoring model can be accurately polished, such as identifying evasive behaviors such as high-frequency small-amount split remittances, and at the same time verifying the stability of the IBPS and FPS direct connection systems. This "pilot first, then promote" approach is similar to the mechanism of the "regulatory sandbox" in the Web3 field, which prioritizes security and then gradually releases innovative value. Small amounts are the starting point, not the end. As the system matures, the scenarios and quota expansion of Cross-border Payment will follow the logic of controllable risks and step-by-step progress, but each step will need to cross the deep waters of compliance.

(III) Potential Blind Spots in Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT)

Although Cross-Border Payment is endowed with the technical capability of “account arrival in seconds”, in the field of compliance, “fast” does not mean that risk control standards can be lowered.

According to the provisions of China’s Anti-Money Laundering Law and Hong Kong’s Organized and Serious Crimes Ordinance and Anti-Money Laundering and Terrorist Financing Ordinance, any cross-border payment transaction must comply with compliance obligations such as KYC (customer identification), STR (suspicious transaction report), and CTF (counter-terrorist financing). Zhifutong is currently set up with "small amount, real name, whitelist scenario" in an attempt to place transactions in a low-risk zone, but this also poses the following legal risks: First, structural split transactions: malicious actors may split large amounts of illegal funds into multiple small transactions and remit them in batches in the Zhifutong system to evade the review threshold of the traditional banking system. This will place extremely high demands on the behavior recognition model and big data analysis capabilities of the Zhifutong system. Secondly, false scenario injection: Zhifutong currently supports designated scenarios such as studying abroad tuition, medical treatment, and salary payment. Some companies may achieve cross-border capital flow by fabricating transaction backgrounds, forging contracts, etc., forming an "arbitrage channel under the guise of compliance." Finally, the risk of intermediary abuse: After accessing Alipay, third-party platforms such as payment aggregators, e-commerce platforms, and API service providers may extend their services to the gray area, such as payment and collection on behalf of others, fund collection without real transaction background, hidden commission payment, etc. If such behavior is not identified and supervised in a timely manner, it may amplify systemic risks.

(IV) Regulatory arbitrage and the risk of “domestic and foreign capital circulation”

In the context of incomplete capital account opening, if cross-border payment channels are used by enterprises or individuals to circumvent cross-border financing, asset transfers or leveraged operations, such as mainland residents remitting large amounts of “salaries” to Hong Kong accounts through payment channels, and then transferring them back to the mainland through stablecoins or virtual asset platforms, it constitutes capital transit and arbitrage; and Hong Kong companies “package” payables as salary payments and labor expenses, using payment channels to avoid domestic foreign exchange collection and payment management, forming a gray financing path without foreign exchange registration. Therefore, regulators are very likely to strengthen the “scenario penetration” supervision of payment channels in the future, and conduct a full-chain review of transaction structures, capital flows and the background of payees and payees. Enterprises must ensure that transactions have authentic, legal and verifiable background information to prevent being considered as illegal foreign exchange transactions or fictitious contracts to escape foreign exchange. Lawyers have something to say Cross-border Payment Pass is reshaping the underlying logic of Hong Kong's cross-border payments with "small amounts" as its fulcrum. It is both an efficiency revolution and a compliance revolution. For individuals and small and medium-sized enterprises, the satisfaction of high-frequency small-amount demands can activate the long-tail economy and turn cross-border payments into "daily necessities." For Hong Kong, this is a key step to consolidate its position as an international financial center. Through a "safe + efficient" cross-border payment infrastructure, it will enhance its attractiveness to global funds and innovative companies. With the expansion of scenarios and the iteration of technology, the boundaries of "small amounts" will gradually open up, but the core logic remains unchanged: Compliance is the premise, efficiency is the means, and inclusiveness is the goal. For companies going to Hong Kong and Web3 practitioners, understanding this logic and making good use of compliance tools such as PayPass can help them gain a firm foothold in the new landscape of cross-border payments in Hong Kong and seize real long-term opportunities.