The Bank for International Settlements (BIS) and central bank partners have on Thursday launched Project Mandala, which explores the feasibility of encoding jurisdiction-specific policy and regulatory requirements into a common protocol for cross-border use cases such as foreign direct investment, borrowing and payments.

In a joint statement, BIS and central bank partners said that disparate policy and regulatory frameworks between different jurisdictions are among the chief obstacles to smooth and efficient cross-border payments, and they contribute to the regulatory compliance burden across the payment chain, increase the time for cross-border transactions and introduce uncertainties among stakeholders.

Project Mandala is a joint collaboration between BIS Innovation Hub (BISIH) Singapore Centre, Reserve Bank of Australia (RBA), Bank of Korea (BOK), Bank Negara Malaysia (BNM), and Monetary Authority of Singapore (MAS), with financial institutions.

The project explores the feasibility of encoding policy and regulatory requirements into a common protocol. It also looks to automate compliance procedures, provide real-time transaction monitoring and increase transparency and visibility around country-specific policies.

The project also aims to address key challenges identified during Project Dunbar, which developed an experimental multiple central bank digital currency (mCBDC) platform.

According to the statement, the envisioned compliance-by-design architecture could enable a more efficient cross-border transfer of any digital assets including central bank digital currencies (CBDCs) and tokenized deposits.

It could also serve as the foundational compliance layer for legacy and nascent wholesale or retail payment systems.

The measures could include quantifiable and configurable foreign exchange rules, as well as anti-money laundering and countering the financing of terrorism (AML/CFT) measures.

Project Mandala aligns with the Financial Stability Board 2023 priority actions for achieving the G20 targets for enhancing cross-border payments in the area of promoting an efficient legal, regulatory and supervisory environment for cross-border payments while maintaining their safety, security and integrity.

“BNM is committed to making cross-border payments more efficient. Project Mandala could pave the way for more seamless cross-border transactions in the future while ensuring that regulatory compliance and transaction security are maintained,

“We welcome its potential, not only for Malaysia but also for the global community,” BNM Assistant Governor Norhana Endut said.

Meanwhile, RBA Assistant Governor (Financial System) Brad Jones, said that the project will help them to understand how embedding policy and regulatory measures in a common protocol could be used to improve the speed, cost and transparency of cross-border transactions.

“Enhancing cross-border payments is a priority for Australia and the wider international community, and the Bank is committed to doing what it can to contribute to this effort,” he said.

BIS Innovation Hub and central banks of Australia, Malaysia, Singapore and South Africa develop experimental multi-CBDC platform for international settlements