Global: BIS and Central Banks Explore Embedding Compliance Requirements into Real-Time Cross-Border Transactions

The Bank for International Settlements (BIS), in collaboration with the central banks of Australia, Korea, Malaysia, and Singapore, is embarking on an initiative to investigate the possibility of incorporating regulatory requirements into cross-border transactions.

One of the primary challenges hindering seamless and efficient cross-border payments is the existence of diverse policy and regulatory frameworks across different jurisdictions. These disparities not only increase the regulatory compliance burden throughout the payment process but also lead to extended transaction times and introduce uncertainties among stakeholders.

Named “Project Mandala,” this Proof-of-Concept aims to alleviate the burden of policy and regulatory compliance by automating compliance procedures, offering real-time transaction monitoring, and enhancing transparency regarding country-specific policies.

Project Mandala seeks to address key challenges identified during “Project Dunbar,” another initiative led by the BIS that focused on developing an experimental platform for multiple central bank digital currencies (mCBDC).

The envisioned architecture, designed for compliance-by-design, has the potential to facilitate more efficient cross-border transfers of various digital assets, including Central Bank Digital Currencies (CBDCs) and tokenized deposits. Additionally, it could serve as the foundational compliance layer for both existing and emerging wholesale or retail payment systems.

Among the measures being explored are quantifiable and configurable foreign exchange rules, as well as anti-money laundering and countering the financing of terrorism (AML/CFT) measures.