Blockchain and smart contracts are driving the rapid development of digital currencies, reshaping the underlying logic of payment systems. Central Bank Digital Currencies (CBDCs) are emerging as a sovereign digital currency pathway, offering transformative opportunities for cross-border payment clearing. This article examines the challenges of traditional cross-border payment clearing systems, reviews global CBDC initiatives, and analyzes the effectiveness of multilateral CBDC bridges (mBridge) in improving cross-border payments. It also provides strategic recommendations for leveraging CBDCs to enhance RMB cross-border clearing and promote RMB internationalization.

1. Challenges and Drivers for Change in Traditional Cross-Border Payment Clearing Systems The Committee on Payments and Market Infrastructures (CPMI) under the Bank for International Settlements (BIS) categorizes cross-border payment clearing into four models: correspondent banking, payment system interconnection, single-platform, and peer-to-peer models. The correspondent banking model remains dominant but faces growing criticism due to inefficiencies in speed, cost, coverage, transparency, and security amid geopolitical tensions, technological advancements, and evolving user demands.

- **Slow Processing**: Traditional cross-border clearing relies on multi-tiered correspondent banking, leading to prolonged settlement times (1–3 business days) due to repeated AML/CFT checks and varying operational hours across jurisdictions. - **High Costs**: Intermediaries such as payment institutions, clearinghouses, and SWIFT drive up costs, with global remittance fees averaging 6.3% in 2023 (FSB data). - **Lack of Transparency**: Fragmented systems hinder end-to-end tracking, resulting in unpredictable fees, exchange rate impacts, and compliance delays. - **Limited Coverage**: Reliance on global banking infrastructure excludes unbanked populations and underdeveloped regions. - **Geopolitical Risks**: SWIFT’s dominance, weaponized for sanctions, exposes vulnerabilities in the current system.

2. CBDCs as a Solution for Cross-Border Payment Clearing CBDCs, issued by central banks, are classified into retail (for public use) and wholesale (for interbank transactions). According to the 2024 BIS survey, 91% of central banks are exploring CBDCs, with 67% in pilot stages. Wholesale CBDCs aim to improve cross-border payments through three interoperability models: - **Compatibility**: Harmonizing policies and standards (e.g., Helvetia project). - **Interconnection**: Shared technical interfaces (e.g., Stella, Jasper-Ubin). - **Single Multi-Currency System**: Unified blockchain platforms (e.g., mBridge, Dunbar).

3. Effectiveness of mBridge in Cross-Border Clearing **Development**: Launched by the People’s Bank of China (PBoC) with Hong Kong, Thailand, and UAE, mBridge evolved from the Inthanon-LionRock project to a multilateral platform in 2021. By June 2024, it entered its MVP phase, enabling real transactions.

**Advantages**: - **Efficiency**: Distributed ledger technology (DLT) reduces settlement time to 6–9 seconds. - **Transparency**: Smart contracts embed compliance rules, enhancing monitoring. - **Cost Reduction**: Synchronized settlement cuts backend, forex, and liquidity costs.

**Challenges**: - **Regulatory Complexity**: Divergent legal frameworks persist. - **Risks**: Cybersecurity, liquidity, and systemic risks remain.

4. Strategic Recommendations - **Enhance mBridge**: Strengthen interoperability with CIPS, expand partnerships (e.g., RCEP, Belt and Road), and promote international regulatory alignment. - **Boost RMB Internationalization**: Scale digital RMB (e-CNY) adoption in trade, energy, and e-commerce while addressing legal and technical hurdles.

By advancing CBDC infrastructure and cross-border collaboration, China can reduce reliance on SWIFT, elevate the RMB’s global role, and foster a more resilient financial ecosystem.