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A global central bank test lab has introduced a prototype bitcoin monitoring system designed to provide authorities with better insights into the usage patterns of the cryptocurrency. The project, known as Atlas and initiated by the Bank for International Settlements (BIS) at the Dutch central bank over five years ago, has gained prominence in the wake of recent upheavals in the cryptocurrency industry.
Atlas has created a “proof of concept” platform that aggregates data from both publicly accessible “on-chain” cryptocurrency ledgers and less readily available “off-chain” data, reported by select exchanges and users. While this data offers a broad view of cryptocurrency activity, the anonymous and location-agnostic nature of crypto wallets means that precision remains a challenge.
According to the BIS, initial data analysis from the platform reveals substantial cross-border cryptocurrency flows, albeit with uneven geographical distribution, although the organization acknowledges the inherent uncertainty.
Regulators have grown increasingly concerned about the decentralized nature of cryptocurrencies, especially following the collapse of widely-used stablecoin pair Luna and TerraUSD, as well as the FTX platform last year.
The BIS’ ‘innovation hub’ prototype generates “dashboards” displaying information such as the conversion of bitcoin to U.S. dollars at specific times and locations worldwide. These dashboards also offer insights into the adoption and relative significance of crypto markets as they fluctuate in popularity.
Cross-border cryptocurrency flows are particularly significant for central banks, impacting cross-border payments, economic analysis, and balance of payments statistics. The BIS notes that such flows may constitute a substantial portion of cross-border transfers in some countries, but the lack of comprehensive data makes quantification challenging.
The BIS emphasizes the importance for central banks to develop a firsthand understanding of cryptocurrencies and decentralized finance (DeFi), including the associated risks and opportunities within the financial system.
The dashboards will now be shared with a group of “test” central banks to gather feedback and facilitate further development, the BIS stated.
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