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Stablecoins, Compliance, and PayFi: Crypto Payments Enter the Age of Pragmatism

April 11, 2025

Blog

As the global crypto ecosystem matures, stablecoins are taking center stage in redefining cross-border payment infrastructure. The conversation is no longer just about innovation—it’s about practicality, compliance, and scalability.

During Hong Kong Web3 Festival 2024, Cobo convened a closed-door roundtable titled “Evening Dialogues in Hong Kong: Exploring Wallet Innovation and Crypto Security”. The event brought together leading voices from law, security, and digital payment infrastructure, including BlockSec, JunHe Law Offices, ZAN, Klickl, and 4Alpha Group. The focus: how stablecoins are being integrated into regulated frameworks—and what that means for payment innovation.

Jacqueline Qiao, Partner at JunHe Law Offices, outlined the forward-looking regulatory stance Hong Kong is taking:

  • Stablecoin Licensing Regime: A legislative proposal submitted in December 2024 seeks to introduce a licensing system for fiat-backed stablecoin issuers operating in Hong Kong. The Hong Kong Monetary Authority (HKMA) would oversee compliance across reserve management, AML/KYC, governance, and disclosure.

  • OTC Oversight: Virtual asset OTC services are also being folded into the regulatory fold. Licensed OTC providers will be required to complete wallet identity verification, maintain a local office, and implement robust AML controls.

Together, these developments lay the foundation for a compliant crypto payment ecosystem—one that bridges institutional finance and Web3-native infrastructure.

Yajin Zhou, CEO of BlockSec, warned that systemic risks in stablecoin architecture remain under-addressed, spanning:

  • Smart Contract Exploits – From infinite minting bugs (as seen with Cashio on Solana) to oracle manipulation (BEUR on Polygon).

  • Governance Attacks – Mochi’s USDM collapse due to interest rate manipulation through governance votes.

  • Tokenomic Design Failures – Terra UST’s collapse via a “death spiral” due to flawed arbitrage mechanisms.

  • Operational Risks – Including key leaks, phishing, and permissions abuse.

  • Compliance Gaps – A lack of KYT/KYA tooling hinders audit-grade suspicious activity reporting.

BlockSec’s Phalcon platform addresses these issues by embedding real-time monitoring, permission control, and KYT compliance checks directly into early-stage system architecture—a proactive approach to “security-by-design.”

Speakers from KUN and Klickl showcased how stablecoin payments are moving from fragmented solutions to integrated systems, especially in emerging markets:

KUN: Building a Cross-Border Payment Rail for the Global South

Liu Jialiang, Founder and CEO of KUN, shared how their platform—KUN | Space—is creating stablecoin settlement networks tailored for Southeast Asia, Latin America, and Africa.

Key features include:

  • KYT screening

  • Virtual enterprise cards

  • Interfaces for real-world asset (RWA) investment

Their goal? Become a 24/7 alternative to SWIFT for cross-border SME payments using low-cost, low-friction stablecoin rails.

Michael Zhao, CEO of Klickl, described the development of a Web3-native account system supporting institutional fund flows, asset conversion, and multi-currency settlement.

The system combines elements of Stripe’s merchant tools with digital banking services—complete with cross-chain support and stablecoin integration. Already a major fintech player in the MENA region, Klickl is aligning with regulators to scale compliant Web3 financial infrastructure.

4Alpha Group: Payment Meets Yield in a New Stablecoin Paradigm

Chris Xie, CEO of 4Alpha Group, introduced a quant-driven liquidity model built on stablecoins. Using market-neutral strategies like perpetual funding arbitrage, 4Alpha offers low-volatility returns on “idle” funds within payment systems.

Compared to legacy payment firms that direct customer float into near-zero-yield money market funds, 4Alpha’s model proposes “payment + yield” as a sustainable architecture—especially for institutions seeking to monetize float while remaining compliant.

Lucas Yang, Head of Sales and Solutions at Cobo, presented the company’s “one-stop digital wallet infrastructure” as the backbone for cross-border stablecoin payments and settlement.

Key Capabilities:

  • 80+ chains, 3,000+ tokens supported—including USDT, USDC, and regional stablecoins like HKD-pegged tokens.

  • Modular Wallet Architecture:

    • MPC Wallets – Let enterprises retain key control.

    • Custodial Wallets – For full outsourcing of key management.

  • Payment-Oriented Wallet Operations:

    • Transaction-specific deposit addresses

    • Dynamic fee optimization by chain and SKU

  • Built-in KYT Risk Engine: Real-time, API-based suspicious transaction alerts.

  • Liquidity Routing: Stablecoins can be off-ramped through OTC or leveraged in DeFi for short-term returns.

Already adopted across verticals—from gaming and e-commerce to quant funds—this solution supports the full “PayFi” stack: payment, settlement, reconciliation, and capital deployment.

Stablecoins are no longer just digital IOUs—they’re evolving into mission-critical infrastructure for global payments. The path forward depends on three critical factors:

  1. Licensing Clarity – Stablecoin issuers must operate within transparent, enforceable legal frameworks.

  2. Security & Compliance by Design – Systems must embed risk controls and regulatory tooling from the start.

  3. Sustainable Business Models – Payment platforms must manage idle capital with both compliance and yield in mind.

With regulatory clarity improving and platforms like Cobo enabling scalable deployment, stablecoin payments are finally moving from theory to practice.

For enterprises navigating the convergence of crypto, compliance, and capital flows, the opportunity isn’t about whether to adopt—it’s about building the right foundation to thrive.

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