Bank of International Settlements (BIS) and Partners Develop Project Atlas for Crypto Tracking
The Bank of International Settlements (BIS), along with several major central banks in Europe, is collaborating on the development of a new data platform called Project Atlas. This platform aims to map and understand the economic impact of the rapidly growing cryptocurrency market.
Introduction to Project Atlas
Project Atlas is a collaborative effort between the BIS, the European Central Bank (ECB), De Nederlandsche Bank (DNB), Deutsche Bundesbank, and the Bank of France. Its purpose is to analyze and visualize cross-border flows of cryptoassets, focusing on the emerging world of cryptocurrencies and decentralized finance (DeFi).
The BIS recently published a report on October 4th, providing insights into the upcoming data platform and its first proof of concept, developed in partnership with the Bundesbank and DNB.
Challenges in Crypto and DeFi Markets
The report highlights the remarkable growth of the crypto and DeFi markets in recent years, reaching a combined market capitalization of over $1 trillion. However, it also identifies two key challenges faced by these markets – lack of transparency and potential risks to financial stability.
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Specifically, the report references the failure of Terra (LUNA) and its stablecoin terraUSD (UST) in 2022 as an example of the risks associated with these markets.
Proof of Concept for the Data Platform
In collaboration with the ECB, DNB, Deutsche Bundesbank, and the Bank of France, the BIS has developed a proof of concept for the Project Atlas data platform.
The proof of concept combines on-chain data from public blockchains and off-chain transactions from cryptocurrency exchanges. One of the initial steps of Project Atlas involves analyzing crypto flows between different global locations. While this is just the beginning, the data already reveals significant capital flows between cryptocurrency exchanges.
Challenges in Tracking Cryptocurrency Exchanges
The report acknowledges that identifying the locations of cryptocurrency exchanges is not always easy. Therefore, the identified flows are estimates of the actual transaction volumes.
Nonetheless, the first pilot of Project Atlas indicates that these flows are economically significant and substantial. The project plans to incorporate more data sources in the next development phase, including obtaining and analyzing data from Ethereum nodes and DeFi protocols.
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Throughout these developments, the data collected by Project Atlas can be used to systematically analyze flows and study the influence of price shocks, market developments, and country-specific factors on crypto flows.
Overall, Project Atlas aims to provide valuable insights into the dynamics of the crypto market, enhance transparency, and mitigate risks to financial stability.