BIS and big banks introduce Project Mandala for improved cross-border transactions

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As a seasoned analyst with extensive experience in global finance and regulatory compliance, I am genuinely excited about Project Mandala. Having navigated through the complexities of cross-border transactions myself, I can appreciate the challenges this initiative aims to address – varying regulations, high costs, and slow transaction speeds.

A consortium made up of the Bank for International Settlements and central banks from Australia, South Korea, Malaysia, and Singapore have launched Project Mandala, an innovative approach where regulatory compliance is integrated into international financial transactions, eliminating the need for separate checks.

This program aims to tackle frequent challenges encountered in global transactions, including diverse regulations that tend to increase costs and decrease transaction speeds. As proposed by the Bank for International Settlements (BIS), it aspires to simplify cross-border payments without compromising privacy or the thoroughness of regulatory reviews, utilizing a “compliance-built-in” methodology.

Project Mandala is adaptable to work seamlessly with contemporary digital asset platforms, including central bank digital currencies, as well as established systems such as SWIFT. This flexibility allows it to accommodate both traditional financial entities and the burgeoning digital financial systems.

Improved cross-border transactions

As a researcher involved in Project Mandala, I’m thrilled to report that we have successfully progressed to the proof-of-concept phase. In this stage, we’ve managed to showcase its functionality within a controlled setting. Our project’s goals harmoniously resonate with the G20’s forward-thinking vision, aiming to expedite, reduce costs, and enhance transparency in cross-border transactions.

This setup utilizes a distributed structure, consisting of three key parts: a peer-to-peer communication network, a rule execution system, and a verification system. These components guarantee that all compliance procedures are carried out prior to any transactions being executed.

After verifying the checks, a “certificate of conformity” is generated, which is included in cross-border digital transactions. This certificate ensures compliance while preserving user privacy by validating transactions without disclosing sensitive personal information.

In practical terms, Project Mandala showcased its utility by presenting two real-life scenarios. One of these instances revolved around cross-border loans between Singapore and Malaysia. Here, the system was designed to handle compliance matters related to managing capital flows and enforcing sanctions checks automatically.

In the second scenario, it was found that South Korea and Australia enhanced their procedures for ensuring compliance when it comes to trading unlisted securities in international lending, as stated by the Bank for International Settlements.

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2024-10-28 17:54