According to Cointelegraph, the Bank for International Settlements (BIS) and its central bank partners have showcased the potential for embedding regulatory compliance into cross-border transaction protocols through Project Mandala. This initiative involves collaboration among central banks globally, including the BIS Innovation Hub Singapore Centre, the Reserve Bank of Australia, the Bank of Korea, Bank Negara Malaysia, and the Monetary Authority of Singapore (MAS).
On October 28, the BIS updated its Project Mandala page, indicating that the project has reached its proof-of-concept stage. Aiming to automate compliance for cross-border transactions, Project Mandala is one of BIS's key projects for 2024. The BIS included this project in its 2024 work program on January 23. The initiative also aligns with the G20's priority actions for enhancing cross-border payments.
During the proof-of-concept phase, all participant institutions, including commercial banks, central banks, and other regulated financial entities, will operate a Mandala node within their systems. Participants will interact through a peer-to-peer messaging system, which will help them obtain relevant policies applicable to transactions. The system will then transmit the necessary data to generate proof of compliance and manage any other information needed for automated compliance checks. Within the Mandala system, rules across jurisdictions are stored in a repository and distributed across relevant parties. The data is applied against consumer transaction data to ensure that cross-border transactions are compliant.
The system implements zero-knowledge proofs (ZK-proofs) to complete transaction compliance checks privately. ZK-proofs allow a prover to convince a verifier that a particular claim is true without revealing the details of the claims. In an announcement, Maha El Dimachki, the head of the BIS Innovation Hub Singapore Centre, expressed optimism about the potential of Project Mandala’s early results to enhance cross-border payments. El Dimachki stated that Mandala is pioneering the compliance-by-design approach to improve cross-border payments without compromising privacy or the integrity of regulatory checks.
