KUALA LUMPUR (Oct 5): The Bank for International Settlements (BIS) and its central bank partners, including Bank Negara Malaysia (BNM), have launched Project Mandala, which aims to explore the feasibility of encoding jurisdiction-specific policy and regulatory requirements into a unified protocol for a wide range of cross-border applications, such as foreign direct investment, borrowing, and payments.

A joint collaboration between BIS Innovation Hub (BISIH) Singapore Centre, Reserve Bank of Australia (RBA), Bank of Korea (BOK), BNM and the Monetary Authority of Singapore (MAS), the proof-of-concept Project Mandala's central objective is to mitigate the compliance burden that has been one of the primary challenges hindering smooth and efficient cross-border payments.

This will be achieved by automating compliance procedures, introducing real-time transaction monitoring, and enhancing transparency regarding country-specific policies.

The project builds upon insights gleaned from "Project Dunbar", a previous endeavour that focused on developing an experimental platform for multiple central bank digital currencies (mCBDC), according to a joint statement from the partners on Thursday.

The proposed "compliance-by-design" architecture holds the potential to facilitate more efficient cross-border transfers of digital assets, including Central Bank Digital Currencies (CBDCs) and tokenised deposits. It could also serve as the foundational compliance framework for both established and emerging 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," the statement read, adding Project Mandala aligns seamlessly with the Financial Stability Board's 2023 priority actions for achieving 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," said BNM assistant governor Dr Norhana Endut.