The Bank for International Settlements (BIS) collaborates with 4 central banks to implement the Mandala project, applying technology to automate compliance processes in cross-border transactions, promising to reduce costs and speed up processing.
On October 28, the Bank for International Settlements (BIS) announced its collaboration with the central banks of Australia, South Korea, Malaysia, and Singapore on the Mandala project, an initiative aimed at addressing regulatory compliance challenges in cross-border transactions. The project is led by the BIS Innovation Center in Singapore, aiming to simplify and automate compliance processes, thereby reducing costs and processing times for transactions.
Cross-border transactions currently often face numerous compliance barriers due to differences in legal frameworks among countries. This leads to significant cost increases for financial institutions and prolongs transaction processing times, impacting business efficiency and international trade. The Mandala project was born with the goal of addressing these obstacles while still ensuring the maintenance of necessary supervisory standards.
Technology driving compliance
The Mandala project adopts a 'compliance-by-design' approach, ensuring the security of personal information and the integrity of the verification and monitoring processes. The system operates on a decentralized infrastructure, closely integrating regulatory compliance among central banks and financial institutions. The three main components of Mandala include: a peer-to-peer messaging system, a rules engine, and a proof engine.
How the Mandala project will streamline cross-border transactions. Source: BIS
This mechanism allows the system to automatically complete all compliance checks before a transaction is initiated. Once the checks are complete, Mandala will generate a compliance certificate accompanying the digital payment asset or cross-border payment order.
Ms. Maha El Dimachki, Director of the BIS Innovation Center in Singapore, stated: “The Mandala project has reached the proof-of-concept stage, aligning with G20 priorities on improving cross-border payments. The ability to reduce costs, accelerate transactions, and ensure compliance are the standout benefits of the project.”
Another notable point is that Mandala is designed to integrate effectively with both emerging digital asset payment systems, including central bank digital currencies (CBDC), and traditional payment messaging systems like SWIFT. This dual integration capability gives Mandala flexibility, adapting to both the future digital asset ecosystem and the current financial infrastructure.
Furthermore, the project has implemented programmable compliance for digital assets, allowing compliance terms to be seamlessly embedded directly into smart contracts. This opens up tremendous potential for automating and optimizing compliance processes in the digital finance sector.
