LONDON (Reuters) – A global central bank test lab has created a prototype bitcoin monitoring system to provide authorities with a clearer understanding of how, when, and where the cryptocurrency is used.
The project, named Atlas, was initiated at the Dutch central bank over five years ago, but its significance has become more evident in the past 18 months following several chaotic collapses within the crypto industry.
Atlas developed a “proof of concept” platform that collects data from publicly available “on-chain” crypto ledgers, as well as more difficult to obtain “off-chain” data reported by specific exchanges and users.
By analyzing this information, the system can provide a general overview of cryptocurrency activity. However, due to the ability to set up anonymous crypto wallets without specifying the owner’s location, the data may not always be precise.
“An initial analysis of data collected by the platform indicates that cross-border flows are significant in economic terms and vary across geographical regions,” the BIS revealed. However, the report acknowledges the presence of uncertainty.
Regulators have growing concerns about the decentralized nature of cryptocurrencies, especially following the collapse of widely-used stablecoins Luna and TerraUSD, as well as the FTX platform last year.
The BIS’ ‘innovation hub’ prototype generates “dashboards” displaying information such as the number of bitcoin being converted into U.S. dollars at specific times and locations worldwide. These dashboards can also provide insights into the adoption and relative importance of crypto markets as they rise or fall in popularity.
Cross-border crypto flows are particularly important for central banks regarding cross-border payments, economic analysis, and balance of payments statistics, the BIS emphasized. For some countries, these flows may constitute a significant portion of cross-border transfers that are challenging to measure due to data gaps.
“Central banks need to acquire direct knowledge of crypto and DeFi, as well as the risks and opportunities they present to the financial system,” the BIS stated.
The dashboards will now be available to a group of “test” central banks for feedback and further development, the BIS added.
(Additional reporting by Elizabeth Howcroft in London; Editing by Gareth Jones)
Credit: The Star : Tech Feed
