Cross Border Transactions Enhanced In Experimental Project -- BIS, Central Banks

KUALA LUMPUR, Oct 28 (Bernama) -- The Bank for International Settlements (BIS) and its central bank partners have successfully demonstrated with Project Mandala that regulatory compliance can be embedded in cross-border transaction protocols.

This experimental project is a collaboration between the BIS Innovation Hub Singapore Centre, the Reserve Bank of Australia, the Bank of Korea, Bank Negara Malaysia (BNM) and the Monetary Authority of Singapore, the joint statement said.

The project which has now reached the proof of concept stage, aligns with the G20 priority actions for enhancing cross-border payments, as it has the potential to reduce costs and increase transaction speed while preserving regulatory compliance.

bootstrap slideshow

BIS Innovation Hub Singapore Centre head Maha El Dimachki said Mandala is pioneering the compliance-by-design approach to improve cross-border payments without compromising privacy or the integrity of regulatory checks.

“We are optimistic about the potential of these early results to enhance cross-border payments,” she said.

Meanwhile, BNM assistant governor Dr Norhana Endut said the project serves as a critical building block to further advance cross-border payments.

bootstrap slideshow

“We have successfully demonstrated a potential solution to address key challenges with existing compliance processes, unlocking the pathways for faster, more secure, and efficient international transactions.

“It would also reinforce our collective commitment to fostering greater economic and financial integration while enhancing regulatory oversight capabilities,” she said.

Project Mandala aims to raise the speed and efficiency of cross-border transactions by automating compliance procedures, enhancing transparency of country-specific policies and providing real-time reporting and monitoring for regulators and supervisors.

It has a compliance-by-design decentralised system to help streamline cross-border payments by embedding regulatory compliance within a network of financial institutions and central banks.

This decentralised architecture integrates three core components: a peer-to-peer messaging system, a rules engine and a proof engine.

It ensures that all necessary compliance checks have been completed before the payment instruction is initiated.

“Once all checks have been completed, the Mandala system automatically generates a compliance proof, which can accompany any digital settlement asset or payment instructions across borders.

“To preserve privacy, the compliance proof can be verified without revealing underlying customer data,” it said.

Mandala successfully integrates with both nascent digital asset settlement systems, such as a wholesale central bank digital currency, and traditional payment messaging systems like Swift.

“This dual integration ensures the Mandala system’s versatility and modularity support both future digital asset ecosystems and existing financial infrastructures.

“For digital assets, Mandala deployed programmable compliance that can be embedded into smart contracts,” it added.

--BERNAMA