On January 23rd, the BIS included Project Mandala in its 2024 work program and made it a priority.
By Mayowa Adebajo
Edited by Julia Sakovich
Updated
3 mins read
The Bank for International Settlements (BIS), along with its central bank partners, has hinted at a new development in cross-border transactions. Through its brainchild project dubbed “Project Mandala”, BIS and its partners may have confirmed that it is very possible to embed regulatory compliance protocols directly into cross-border transaction protocols.
This means that international financial transfers can still be done easily without having to discard the requirements laid down by regulators around the world.
As earlier noted, Project Mandala is a collaborative effort of central banks worldwide. For a long time, regulatory compliance has been a major challenge in global finance. Particularly, in terms of different jurisdictions possibly having different regulatory requirements.
This was why, on January 23rd, the BIS included Project Mandala in its 2024 work program and made it a priority. To achieve its aims and objectives, the BIS partnered with the BIS Innovation Hub Singapore Centre, the Bank of Korea, the Reserve Bank of Australia, the Monetary Authority of Singapore (MAS), and Bank Negara Malaysia.
Interestingly, the objectives of the project also tally with the ambitions of the G20, particularly in the area of cross-border payments. Although Project Mandala has been underway for a while now, the BIS only updated about it reaching its proof-of-concept stage some moments ago.
In a Monday announcement, the BIS noted that the proof-of-concept phase has begun. This phase, according to the report, will see each participating institution, including commercial banks and other regulated entities, operating a “Mandala node”.
It is these nodes that will enable automated, real-time compliance checks for transactions between countries. thereby making the entire process a lot more efficient and secure.
During the proof-of-concept phase, each participant institution will interact through a peer-to-peer messaging system. This will help them to obtain up-to-date regulations that apply to specific transactions. What that means is that the system uses a distributed repository to engage the compliance rules of the applicable jurisdiction each time they are needed.
It might be worth mentioning that one of the most important aspects of Project Mandala is how it uses zero-knowledge proofs (ZK-proofs) to privately check for compliance.
This means that the system may verify these compliance claims without exposing sensitive transaction details. Not only does this ensure privacy, but it does so in a manner that still maintains regulatory standards.
According to Maha El Dimachki, the head of the BIS Innovation Hub Singapore Centre, there are no doubts that positive results will be seen even in the early stages of the project.
If successful, the BIS may have just started a shift toward more advanced cross-border payment systems that are not only secure but private and also compliant with international standards.
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Mayowa is a crypto enthusiast/writer whose conversational character is quite evident in his style of writing. He strongly believes in the potential of digital assets and takes every opportunity to reiterate this. He's a reader, a researcher, an astute speaker, and also a budding entrepreneur. Away from crypto however, Mayowa's fancied distractions include soccer or discussing world politics.
