The Bank for International Settlements (BIS), in collaboration with central bank partners, has initiated Project Mandala. This project aims to explore the feasibility of encoding jurisdiction-specific policy and regulatory requirements into a common protocol for cross-border use cases, including foreign direct investment, borrowing, and payments.
Addressing Regulatory Complexities in Cross-border Payments
Cross-border payments often face challenges due to the disparate policy and regulatory frameworks in different jurisdictions. These differences create regulatory compliance burdens, increase transaction times, and introduce uncertainties for stakeholders involved in cross-border transactions.
Project Mandala seeks to alleviate these challenges by automating compliance procedures, offering real-time transaction monitoring, and enhancing transparency around country-specific policies. It builds on the findings of Project Dunbar, which focused on developing a multi-central bank digital currency (mCBDC) platform.
Efficient Cross-border Transfer of Digital Assets
The compliance-by-design architecture envisioned in Project Mandala could facilitate more efficient cross-border transfers of digital assets, including central bank digital currencies (CBDCs) and tokenized deposits. It could serve as the foundational compliance layer for both existing and emerging wholesale or retail payment systems.
The measures explored in Project Mandala may include quantifiable and configurable foreign exchange rules, as well as anti-money laundering and countering the financing of terrorism (AML/CFT) measures.
Alignment with Global Priorities
Project Mandala aligns with the Financial Stability Board’s 2023 priority actions, particularly in enhancing cross-border payments. It aims to promote an efficient legal, regulatory, and supervisory environment for cross-border payments while maintaining their safety, security, and integrity.
Central banks involved in this initiative include the Reserve Bank of Australia (RBA), Bank of Korea (BOK), Bank Negara Malaysia (BNM), and the Monetary Authority of Singapore (MAS). Financial institutions are also collaborating on this project to explore innovative solutions for cross-border compliance and payments.
Brad Jones, Assistant Governor (Financial System) at the Reserve Bank of Australia, expressed the importance of enhancing cross-border payments and Australia’s commitment to contributing to this global effort through Project Mandala.
