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BIS, EU central banks building data platform to track crypto, DeFi flows

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The Bank for International Settlements (BIS) has developed a proof-of-concept (PoC) for a system tracking on-chain and off-chain transactions from cryptocurrency exchanges and public blockchains, including Bitcoin.

Working with the Deutsche Bundesbank, De Nederlandsche Bank, the European Central Bank and the Bank of France, the BIS has announced a successful PoC called Project Atlas 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’s first proof-of-concept aims to track on-chain and off-chain data from public blockchains and cryptocurrency exchanges. Source: BIS Project Atlas

The project 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.

Related: Ripple joins BIS cross-border payments task force

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.”

The Project Atlas dashboard shows on-chain transfers on the Bitcoin network and cross-exchange transactions. Source: BIS Project Atlas

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 data will allow flows to be analyzed structurally and the influence of price shocks, financial market developments and country characteristics on crypto flows to be investigated.”

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.

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