According to Cointelegraph, the Bank for International Settlements (BIS) has developed a proof-of-concept (PoC) for a system that tracks on-chain and off-chain transactions from cryptocurrency exchanges and public blockchains, including Bitcoin. The BIS has collaborated with the Deutsche Bundesbank, De Nederlandsche Bank, the European Central Bank, and the Bank of France to create a successful PoC called Project Atlas, which aims to gauge the macroeconomic relevance of cryptocurrency markets and decentralized finance (DeFi) protocols.
The BIS Innovation Hub published details of the concept, which aims to provide insights, information, and economic implications of the sector, citing a lack of transparency and potential risks to financial stability characterized by high-profile failings in the crypto-space like the Terra ecosystem collapse in 2022. Project Atlas combines off-chain data from cryptocurrency exchanges with on-chain data from public blockchains gathered by nodes. The first iteration of the proof-of-concept saw Project Atlas tracking cryptocurrency flows across geographical locations.
The initial approach uses transactions attributed to centralized exchanges in the Bitcoin network, along with the location of those exchanges, as a proxy for cross-border capital flows. The methodology notes that flows are likely lower-bound estimates of actual transaction volumes, given that the country location of exchanges is not easily discernible. Nevertheless, Project Atlas’s initial pilot indicates that inter-exchange is “significant and substantial economically.” In its current iteration, Project Atlas features a front end showcasing dashboards that visualize the results of data aggregation and analysis, including on-chain transfers and the global movement of funds.
The PoC is set to provide an overview of cross-border flows and will provide a means for central banks to evaluate the relative economic significance of the cryptocurrency ecosystem across different jurisdictions. The project will continue incorporating more data sources to move into the next development phase, and extracting and analyzing data from Ethereum network nodes and DeFi protocols is also in the pipeline.
