The Bank for International Settlements (BIS), in collaboration with central banks from Australia, Korea, Malaysia, and Singapore, has successfully demonstrated how regulatory compliance can be embedded into cross-border financial transactions.

Cross-border payments often face hurdles due to differing policy and regulatory frameworks, which create compliance burdens, increase transaction times, and introduce uncertainties. Project Mandala, a Proof-of-Concept initiative, aims to ease these challenges by automating compliance processes, offering real-time transaction monitoring, and enhancing transparency around jurisdiction-specific policies.

Project Mandala builds on the learnings from Project Dunbar, another BIS-led experiment focused on developing a multiple central bank digital currency (mCBDC) platform. Maha El Dimachki, head of the BIS Innovation Hub Singapore Centre, emphasized the project's significance: "Mandala is pioneering the compliance-by-design approach to improve cross-border payments without compromising privacy or the integrity of regulatory checks." The initiative features a decentralized architecture, integrating a peer-to-peer messaging system, a rules engine, and a proof engine, ensuring compliance checks are completed before initiating payments.

The system has proven its effectiveness in practical scenarios, such as cross-border lending between Singapore and Malaysia and capital investment financing between South Korea and Australia. By automating processes like sanctions screening and CFM reporting, Mandala demonstrates technical feasibility and adaptability. It is designed to integrate seamlessly with both emerging digital asset settlement platforms, like wholesale central bank digital currencies, and traditional systems such as Swift. Furthermore, the concept incorporates programmable compliance capabilities for digital assets, allowing regulatory checks to be embedded into smart contracts.