The Bank for International Settlements (BIS) has joined forces with the central banks of Singapore, Malaysia, and Australia to explore innovative solutions for embedding regulatory requirements into cross-border transactions. Recognizing the significant challenges posed by diverse policy and regulatory frameworks across borders, this collaborative effort seeks to enhance the efficiency and transparency of cross-border payments.
The need for harmonizing regulatory standards has long been a hurdle in achieving smooth and efficient cross-border transactions. These disparities in policies and regulations not only increase the compliance burden along the payment chain but also prolong transaction times and create uncertainty for all stakeholders involved.
Project Mandala, a collaborative initiative between BIS Innovation Hub center in Singapore, the Monetary Authority of Singapore, the Reserve Bank of Australia, Bank Negara Malaysia, and the Bank of Korea, aims to address these challenges. The project’s proof of concept is designed to establish a common protocol for cross-border use cases while automating compliance procedures. This includes the development of configurable foreign exchange rules and anti-money laundering measures.
The innovative approach of Project Mandala centers on real-time transaction monitoring, which will enhance transparency and provide better visibility into country-specific policies. By embedding regulatory requirements directly into cross-border transactions, this project aims to streamline compliance processes and reduce friction in international payments.
BIS noted that Project Mandala will tackle key challenges identified in its earlier Project Dunbar, which explored an experimental multiple central bank digital currency (CBDC) platform. Dunbar raised questions about whether foreign commercial banks could be trusted with access to CBDCs, how to simplify payment flows while respecting regulatory differences across jurisdictions, and how multiple central banks could collaborate on a common platform while addressing concerns about financial system resilience and national security.
The compliance-by-design architecture proposed by Project Mandala has the potential to facilitate more efficient cross-border transfers of various digital assets, including CBDCs and tokenized deposits. Moreover, it could serve as the foundational compliance layer for both existing and emerging wholesale or retail payment systems.
Norhana Endut, Assistant Governor of Bank Negara Malaysia, expressed optimism about the project’s potential to pave the way for smoother cross-border transactions while ensuring regulatory compliance and transaction security. He stated, “We welcome its potential, not only for Malaysia but also for the global community.”
The collaborative effort of BIS and these central banks represents a significant stride toward addressing the complexities of cross-border transactions and fostering a more interconnected and compliant global financial ecosystem.
