BIS Project Mandala Successfully Demonstrates Automated Compliance in Cross-Border Transactions

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As a seasoned researcher who has navigated the complexities of global finance for decades, I find the progress of Project Mandala by the Bank for International Settlements (BIS) incredibly intriguing. With my career spanning across various continents and cultures, I have witnessed firsthand the challenges that regulatory compliance presents in cross-border transactions. This project, if successful, could revolutionize international finance, making it more efficient, secure, and compliant with global standards.

The Bank for International Settlements (BIS) and its central bank counterparts have subtly indicated a potential advancement in international transactions, known as “Project Mandala”. This project could potentially allow for the integration of regulatory compliance measures directly within the framework of cross-border transactions, suggesting that such compliance is indeed achievable.

This implies that it’s possible to carry out cross-border money transactions smoothly, while adhering to the regulations set forth by financial authorities globally.

Project Mandala Reaches Proof-of-concept Stage

Previously mentioned, Project Mandala represents a unified initiative among global central banks. Over the years, adhering to varying regulations in international finance has proven to be a significant hurdle. Specifically, diverse legal frameworks across various regions can lead to conflicting regulatory demands.

On January 23rd, Project Mandala was added to the Bank for International Settlements’ (BIS) 2024 work schedule and given top priority because of its importance. To accomplish its goals and objectives, the BIS teamed up 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.

It’s worth noting that the goals of Project Mandala align well with the aspirations of the G20, particularly in relation to cross-border payments. While Project Mandala has been ongoing for some time, it was just recently announced that it has reached its proof-of-concept phase by the BIS.

On a Monday update, I learned that the Bank for International Settlements (BIS) has initiated the proof-of-concept stage for a new project. In this phase, I, along with other participating financial institutions like commercial banks and regulated entities, will be running a “Mandala node”. This means we’ll be actively involved in testing and contributing to the development of this innovative system. Exciting times ahead!

These nodes facilitate instant, automated compliance verifications for cross-border transactions, significantly boosting efficiency and security throughout the process.

How It Works

During the proof-of-concept stage, every participating institution will communicate directly using a peer-to-peer messaging system. This facilitates their access to current regulations relevant to particular transactions. Essentially, the system employs a shared database that activates the compliance rules of the appropriate jurisdiction whenever they are required.

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.

In simpler terms, this implies that the system can validate the compliance claims without disclosing confidential transaction information, thereby preserving privacy while adhering to regulatory requirements.

As an analyst, I’m confidently anticipating that we’ll start seeing encouraging outcomes right from the onset of this project, as per Maha El Dimachki, the head of the BIS Innovation Hub Singapore Centre.

If it proves effective, the BIS could mark a transition towards sophisticated cross-border payment structures that offer both security and privacy while adhering to global norms and regulations.

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2024-10-28 16:12