The Bank for International Settlements (BIS) has unveiled Atlas, a Bitcoin monitoring prototype to offer regulatory authorities insights into cryptocurrency usage. Initiated over five years ago at the Dutch central bank, the project has gained relevance due to recent turmoil in the crypto industry.
Atlas extracts data from both public “on-chain” ledgers and selectively sourced “off-chain” data from exchanges and users, offering a preliminary view of cryptocurrency activities.
Despite the anonymity and decentralized nature of crypto wallets, Atlas provides valuable information on cross-border flows and the evolving crypto market landscape. Central banks worldwide can now harness these insights, addressing concerns regarding crypto’s inherent risks and potential benefits.
The BIS has stated, “An initial analysis of data collected by the platform indicates that cross-border flows are substantial in economic terms and unevenly distributed across geographical regions,” though it acknowledges the uncertainty associated with this data.
In response to growing concerns about the decentralized nature of cryptocurrencies, especially after last year’s collapse of widely-used stablecoin pair Luna and TerraUSD and the FTX platform, the BIS has launched its ‘innovation hub’ prototype, which produces informative “dashboards.”
The dashboards offer insights into the conversion of Bitcoin into U.S. dollars at specific times and locations worldwide, providing crucial data on the adoption and relative importance of crypto markets as they fluctuate in popularity.
Central Banks Grapple with Cross-Border Crypto Challenges
For central banks, understanding cross-border crypto flows is significant, particularly in the context of cross-border payments, economic analysis, and balance of payments statistics. These flows may constitute a substantial portion of cross-border transfers in some countries, yet their quantification remains challenging due to existing data gaps.
The BIS emphasizes the need for central banks to gain firsthand knowledge of cryptocurrencies and DeFi, recognizing both the risks and opportunities they present to the financial system. Furthermore, the bank has announced its intention to make dashboards available to a select group of “test” central banks for feedback and further development, underlining its commitment to fostering greater understanding and oversight of the cryptocurrency landscape.
Last week, BIS General Manager Agustin Carstens advocated for strong legal frameworks to facilitate central bank digital currency (CBDC) adoption. During a conference in Switzerland, he emphasized the critical role that legal frameworks play in building trust, ensuring functionality, and gaining acceptance for digital currencies like CBDCs.
Carstens noted that the public expects modern forms of currency that align with their evolving financial needs and that around 80% of central banks globally lack legal authorization or operate within ambiguous legal frameworks for CBDC issuance. He urged for national conversations within each country to determine CBDC approaches while emphasizing the importance of international coordination to prevent a fragmented system.
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