The Bank for International Settlements, alongside key central bank partners, has unveiled Project Mandala, a pioneering initiative that embeds regulatory compliance directly into cross-border transaction protocols. Utilizing Z-K proofs, the project ensures compliance checks across different jurisdictions without compromising privacy.
A Global Collaboration Among Central Banks
Project Mandala is a joint effort involving several major financial institutions, including the BIS Innovation Hub Singapore Centre, the Reserve Bank of Australia, the Bank of Korea, Bank Negara Malaysia, and the Monetary Authority of Singapore (MAS). This collaboration underscores a unified approach to enhancing cross-border payments and regulatory compliance on a global scale.
Proof-of-Concept Stage Achieved
On October 28, the BIS updated its Project Mandala page, announcing that the initiative has reached its proof-of-concept stage. Recognized as one of the BIS’s key projects for 2024, Project Mandala was included in the BIS work program on January 23. This milestone aligns with the G20 priority actions for improving cross-border payments.
Participant Nodes and Peer-to-Peer Interaction
During the proof-of-concept phase, all participating institutions—including commercial banks, central banks, and regulated financial entities—operate a Mandala node within their systems. These nodes facilitate interaction through a peer-to-peer messaging system, allowing participants to access relevant policies applicable to each transaction.
Zero-Knowledge Proofs for Privacy-Preserving Compliance
The system employs zero-knowledge proofs to conduct compliance checks privately. ZK-proofs enable one party to prove to another that a statement is true without revealing any underlying information. This technology ensures that compliance is maintained without compromising the privacy of transaction details.
Distributed Regulatory Rules Repository
Regulatory rules across jurisdictions are stored in a distributed repository within the Mandala system. These rules are applied against consumer transaction data to verify compliance, streamlining the process of cross-border transactions while adhering to diverse regulatory requirements.
Optimism from BIS Officials
In an official announcement, Maha El Dimachki, head of the BIS Innovation Hub Singapore Centre, expressed optimism about Project Mandala’s early results. She stated:
“Mandala is pioneering the compliance-by-design approach to improve cross-border payments without compromising privacy or the integrity of regulatory checks.”
Project Mandala represents a significant advancement in automating compliance for cross-border transactions. By integrating regulatory compliance into transaction protocols and leveraging innovative technologies like zero-knowledge proofs, the project promises to enhance the efficiency, security, and privacy of international payments.
