The Bank for International Settlements (BIS) has unveiled a proof-of-concept (PoC) system designed to track transactions occurring both on and off the blockchain across cryptocurrency exchanges and public blockchains, including Bitcoin.
Developed in collaboration with Deutsche Bundesbank, ABN AMRO, the European Central Bank, and the Bank of France, the BIS has introduced Project Atlas. This PoC aims to assess the macroeconomic significance of cryptocurrency markets and decentralized finance (DeFi) protocols.
The BIS Innovation Center has revealed the specifics of this concept, which seeks to provide valuable insights, data, and economic assessments of the industry. It addresses the issues of transparency and potential threats to financial stability that have been exposed through significant failures in the cryptocurrency space, such as the Terra ecosystem's collapse in 2022.
Project Atlas combines data from off-chain sources, like cryptocurrency exchanges, with on-chain data from public blockchains collected by network nodes. In its initial phase, this proof of concept tracked the movement of cryptocurrencies across different geographical locations.
The methodology used exchanges located in various countries on the Bitcoin network and the geographical locations of these exchanges as a proxy for assessing cross-border capital flows. However, it acknowledges that this approach may underestimate actual trading volume because it assumes that the countries in which exchanges are based represent the origin of cross-border flows. Nevertheless, preliminary tests suggest that cross-border exchanges can have a significant economic impact.
The current version of Project Atlas provides interactive dashboards that display the results of data aggregation and analysis. This includes visualizations of on-chain transfers and global fund movements.
The PoC's objective is to offer a comprehensive view of cross-border cryptocurrency flows and provide central banks with a means to gauge the economic importance of the cryptocurrency ecosystem in different regions. The data gathered will enable a structured analysis of transaction flows and investigations into how cryptocurrency flows are affected by price fluctuations, financial market developments, and individual country characteristics.
In future development phases, Project Atlas plans to integrate more data sources, including data extraction and analysis from Ethereum network nodes and DeFi protocols.
