The Bank of International Settlements (BIS), in collaboration with the Deutsche Bundesbank, De Nederlandsche Bank, European Central Bank, and the Bank of France, has unveiled a successful proof of concept (PoC) named Project Atlas. This initiative aims to measure the macroeconomic significance of cryptocurrency markets and decentralized finance (DeFi) protocols.
Addressing transparency and stability concerns
The BIS Innovation Hub recently revealed the concept, driven by concerns about a lack of transparency and potential financial stability risks in the crypto sphere, particularly highlighted by incidents like the Terra/LUNA algorithmic stablecoin collapse in 2022.
Source: BIS Project Atlas
Project Atlas is designed to combine data from cryptocurrency exchanges (off-chain) with information from public blockchains (on-chain) collected by network nodes. In its initial phase, Project Atlas tracked cryptocurrency movements across different geographic regions.
The first approach involved analyzing transactions attributed to centralized exchanges within the Bitcoin network, using the location of these exchanges as a proxy for cross-border capital flows. It’s important to note that these flow estimates are conservative due to the challenge of precisely identifying exchange locations. Nevertheless, the initial pilot of Project Atlas revealed that inter-exchange activities have substantial economic significance.
Source: BIS Project Atlas
Currently, Project Atlas offers a user-friendly front-end interface that presents aggregated data and analysis results. This includes information on on-chain transfers and the global movement of funds.
Aiding central banks in assessing the Crypto ecosystem
The PoC’s primary goal is to provide an overview of cross-border cryptocurrency flows, enabling central banks to assess the economic importance of the crypto ecosystem across different jurisdictions. BIS states:
“The data will allow flows to be analyzed structurally and the influence of price shocks, financial market developments, and country-specific characteristics on crypto flows to be investigated.”
However, in an earlier report by Todayq News on February 3, 2023, BIS data showed that the crypto debacles of 2022 had led to an increase in retail trading, but large investors had sold assets, which had negatively impacted smaller investors seeking diversification. BIS emphasized the need for global regulatory coordination and called for better protection of crypto investors.
Now, as the project progresses, more data sources will be incorporated in the next development phase. Additionally, Project Atlas plans to extract and analyze data from Ethereum network nodes and explore data related to DeFi protocols.
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