BIS and EU Central Banks Collaborate on Data Platform to Monitor Crypto and DeFi Transactions

The Bank for International Settlements (BIS) has taken a significant step in the realm of cryptocurrency tracking and analysis. In collaboration with several prominent central banks, including the Deutsche Bundesbank, De Nederlandsche Bank, the European Central Bank, and the Bank of France, the BIS has successfully piloted a proof-of-concept (PoC) named Project Atlas. This initiative aims to delve into the macroeconomic impact of cryptocurrency markets and decentralized finance (DeFi) protocols.

Project Atlas, as detailed by the BIS Innovation Hub, operates at the intersection of on-chain and off-chain transactions, amalgamating data from cryptocurrency exchanges and public blockchains, including Bitcoin. The objective is to bring clarity to the sector, addressing the persistent lack of transparency and the potential financial risks associated with it. Notably, high-profile incidents like the Terra ecosystem collapse in 2022 underscored the need for a more comprehensive understanding of the crypto landscape.

The project’s methodology combines off-chain data sourced from cryptocurrency exchanges with on-chain data retrieved from public blockchains through nodes. In its initial iteration, Project Atlas tracked cryptocurrency flows across different geographical locations. The approach employed transactions attributed to centralized exchanges within the Bitcoin network, using the locations of these exchanges as a proxy for cross-border capital movements. While this method provides a foundational understanding, it is acknowledged that these flows represent a lower-bound estimate due to the challenges in precisely determining the country location of exchanges. Nevertheless, Project Atlas’s pilot phase revealed significant and economically substantial inter-exchange activity.

Project Atlas’s current version boasts user-friendly dashboards that visualize the aggregated data, showcasing on-chain transfers and the global movement of funds. This proof-of-concept aims to furnish central banks with valuable insights, enabling them to assess the economic significance of the cryptocurrency ecosystem across diverse jurisdictions. By structurally analyzing flows and investigating the impact of various factors, such as price shocks and financial market developments, this endeavor promises a holistic overview of cross-border cryptocurrency flows.

The project’s evolution is anticipated to involve the integration of additional data sources, marking its progression into the next developmental phase. This expansion will encompass the extraction and analysis of data from Ethereum network nodes and DeFi protocols, enhancing the depth and scope of insights garnered from the crypto landscape.

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