The Bank for International Settlements (BIS) has developed a proof of concept (PoC) for a system that tracks 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 Bank for International Settlements announced a successful proof of concept called Project Atlas to measure the macroeconomic relevance of cryptocurrency markets and decentralized finance (DeFi) protocols.
BIS Innovation Centre published Details of the concept, which aims to provide insights, information and economic implications for the sector, noting the lack of transparency and potential risks to financial stability characterized by high-profile crypto failures such as the collapse of the Terra ecosystem in 2022.
The project combines off-chain data from cryptocurrency exchanges with on-chain data from public blockchains collected by nodes. The first iteration of the proof of concept saw the Atlas Project tracking cryptocurrency flows across geographic locations.
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The initial approach uses transactions attributed to central exchanges in the Bitcoin network, along with the location of those exchanges, as a proxy for cross-border capital flows.
The methodology indicates that flows are likely to be lower-bound estimates of actual transaction volumes, given that the location of exchanges in a country is not easily discernible. However, the initial Atlas pilot indicates that interoperability is “economically significant and significant.”
In its current version, Project Atlas features a front-end that displays dashboards that visualize the results of data collection and analysis, including cross-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 assess the relative economic importance of the cryptocurrency ecosystem across different jurisdictions:
“The data will allow to analyze flows structurally and study the impact of price shocks, financial market developments and country characteristics on cryptocurrency flows.”
The project will continue to integrate more data sources to move to the next development phase, and data mining and analysis from Ethereum network nodes and DeFi protocols is also underway.
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