One of the central challenges in cross-border payments is navigating the complex and varied policy and regulatory frameworks imposed by different jurisdictions. These differences increase the regulatory compliance burden across the payment chain, slow down transaction times, and create uncertainties for stakeholders. In response, central banks are taking proactive steps to address these issues through Project Mandala, a proof-of-concept initiative led by the BIS Innovation Hub.

The project aims to streamline compliance by automating procedures, enabling real-time transaction monitoring, and enhancing transparency around country-specific regulations. Building on insights from Project Dunbar—an earlier BIS initiative focused on a multiple central bank digital currency (mCBDC) platform—Project Mandala employs a compliance-by-design approach to enhance the efficiency of cross-border payments without compromising regulatory integrity or data privacy.

Project Mandala’s architecture, driven by collaboration among central banks, is decentralized and integrates three key components: a peer-to-peer messaging system, a rules engine, and a proof engine. This structure embeds regulatory compliance within a network of financial institutions and central banks, ensuring that all necessary checks are completed before a payment instruction is initiated. Upon verification, the system generates a compliance proof, which accompanies digital settlement assets or payment instructions across borders. Successful trials between central banks in Singapore, Malaysia, South Korea, and Australia demonstrated Mandala’s capability to automate tasks like sanctions screening and compliance reporting. By integrating with both traditional payment messaging systems like Swift and new digital asset platforms, Mandala showcases a future-proofed approach to cross-border payments. This project underscores the pivotal role of central banks in leading technological advancements and regulatory innovations in global finance.