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EU central banks and BIS are developing a data platform to monitor cryptocurrency and DeFi flows.

The Bank for International Settlements, in collaboration with several prominent European central banks, is in the process of constructing a sophisticated system designed to monitor the global movements of cryptocurrencies.

The Bank for International Settlements (BIS) has recently unveiled a proof-of-concept (PoC) for a cutting-edge system aimed at tracking both on-chain and off-chain transactions originating from cryptocurrency exchanges and public blockchains, including the pioneering Bitcoin network.

In a collaborative effort with the Deutsche Bundesbank, De Nederlandsche Bank, the European Central Bank, and the Bank of France, the BIS has proudly announced the successful culmination of Project Atlas, a PoC endeavor geared towards assessing the macroeconomic significance of cryptocurrency markets and decentralized finance (DeFi) protocols.

The BIS Innovation Hub has divulged comprehensive details of this groundbreaking concept, which strives to offer invaluable insights, information, and a profound understanding of the economic implications surrounding this burgeoning sector. It does so by addressing the lack of transparency and potential risks to financial stability, which have been underscored by high-profile incidents in the crypto realm, such as the Terra ecosystem’s dramatic collapse in 2022.

The initial approach involves scrutinizing transactions associated with centralized exchanges within the Bitcoin network, coupled with pinpointing the geographical locations of these exchanges. This data is employed as a proxy to analyze cross-border capital flows. It’s worth noting that this methodology yields conservative estimates of actual transaction volumes, primarily due to the challenge of accurately determining the country of origin for these exchanges. Nevertheless, Project Atlas’s preliminary pilot findings underscore the substantial and economically significant nature of inter-exchange activities.

In its current iteration, Project Atlas boasts a user-friendly front end replete with dynamic dashboards that vividly illustrate the outcomes of data aggregation and in-depth analysis. This encompasses on-chain transfers and the intricate web of global fund movements.

The PoC is poised to offer a comprehensive overview of cross-border financial flows and will furnish central banks with the means to assess the relative economic impact of the cryptocurrency ecosystem across diverse jurisdictions. As articulated by the project team, “The data will facilitate a structural analysis of flows and an exploration of the influence of price fluctuations, developments in financial markets, and distinctive country attributes on crypto flows.”

This ambitious project is set to continuously expand its horizons by integrating additional data sources as it progresses into the next development phase. Furthermore, the extraction and meticulous analysis of data from Ethereum network nodes and DeFi protocols are also on the project’s radar, promising further insights into this dynamic and rapidly evolving landscape.

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