MAS Partners With BIS And Central Banks to Launch Cross-Border Transaction Project

The Bank for International Settlements (BIS) and several central banks, including the Monetary Authority of Singapore (MAS), have initiated Project Mandala to investigate the potential of incorporating jurisdiction-specific policy and regulatory requirements into a shared protocol. The project aims to simplify cross-border transactions for activities such as foreign direct investment, borrowing, and payments.

The BIS and its partners acknowledge that incongruent policy and regulatory frameworks across jurisdictions present significant obstacles to efficient cross-border payments. These inconsistencies contribute to increased regulatory compliance burdens, prolonged transaction times, and uncertainties among stakeholders involved in cross-border transactions.

Project Mandala, led by the BIS Innovation Hub (BISIH) Singapore Centre, in collaboration with the Reserve Bank of Australia (RBA), Bank of Korea (BOK), Bank Negara Malaysia (BNM), and MAS, as well as other financial institutions, seeks to address these challenges. The project aims to automate compliance procedures, introduce real-time transaction monitoring, and enhance transparency and visibility regarding country-specific policies.

The initiative builds on insights gained from Project Dunbar, an experimental project that focused on creating a multi-central bank digital currency (mCBDC) platform. The envisioned compliance-by-design architecture of Project Mandala could potentially facilitate more efficient cross-border transfers of 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.

The measures proposed by Project Mandala include quantifiable and configurable foreign exchange rules, as well as anti-money laundering and countering the financing of terrorism (AML/CFT) measures. By embedding these processes into a common protocol, the project aims to streamline cross-border transactions and improve the speed, cost, and transparency of such transactions.

The project aligns with the Financial Stability Board's 2023 priority actions, focusing on achieving G20 targets for enhancing cross-border payments. Specifically, it aims to promote an efficient legal, regulatory, and supervisory environment for cross-border payments while maintaining their safety, security, and integrity.

Representatives from participating central banks expressed their commitment to the project's objectives. For instance, the Assistant Governor of Bank Negara Malaysia (BNM), Norhana Endut, emphasised BNM's commitment to making cross-border payments more efficient. The collaboration is seen as a potential avenue for achieving more seamless cross-border transactions globally while ensuring regulatory compliance and transaction security.

Similarly, RBA Assistant Governor (Financial System) Brad Jones highlighted the project's significance in understanding how embedding policy and regulatory measures in a common protocol could enhance the speed, cost, and transparency of cross-border transactions. Australia, along with the wider international community, prioritises efforts to enhance cross-border payments, and the RBA is dedicated to contributing to this global initiative.