The Bank for International Settlements (BIS), along with central banks from Australia, Korea, Malaysia, and Singapore, has successfully concluded testing for Project Mandala. This initiative aims to simplify cross-border transactions by automating compliance within a decentralized network, enhancing efficiency and privacy in global financial systems.
Mandala’s Proof-of-Concept Achieved
On October 28, BIS announced the completion of Mandala’s proof-of-concept phase. The project was tested in two real-world scenarios: a cross-border lending transaction between Singapore and Malaysia, where it streamlined capital flow management (CFM) and sanctions screening; and a capital investment transaction between South Korea and Australia, automating compliance checks for unlisted securities transactions.
Compliance-by-Design Mechanism
Operating through a decentralized network of nodes managed by commercial and central banks, Mandala uses a peer-to-peer messaging system, rules engine, and proof engine to enable secure, direct communication. Mandala integrates specific compliance requirements, like sanctions screening and CFM, while generating cryptographic proofs of compliance.
To protect privacy, the system leverages zero-knowledge (ZK) proofs, allowing secure validation without revealing sensitive information.
Integration with Digital Assets and Traditional Finance
Mandala’s framework supports traditional payment systems (e.g., SWIFT) and digital assets, including CBDCs and stablecoins. For cross-border transfers, it utilizes policy wrapper contracts to lock the original digital asset and mint a wrapped version that can be securely transferred between parties with compliance checks verified by smart contracts.
Towards a Unified Financial Infrastructure
Although experimental, the BIS views Mandala’s success as a step toward streamlined, compliant global financial systems. With its potential to improve transaction efficiency, automate compliance, and enhance privacy, Mandala could support seamless interoperability across regional payment systems, contributing to a more efficient global financial infrastructure.
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