New System Aims to Gauge the Macro Relevance of Cryptocurrency Markets
The Bank for International Settlements (BIS) has partnered with central banks including the Deutsche Bundesbank, De Nederlandsche Bank, the European Central Bank, and the Bank of France to develop a proof-of-concept (PoC) system called Project Atlas. The system aims to track on-chain and off-chain transactions from cryptocurrency exchanges and public blockchains, such as Bitcoin. The goal of the project is to provide insights, information, and economic implications of the cryptocurrency sector, addressing a lack of transparency and potential risks to financial stability.
Project Atlas Combines Off-Chain and On-Chain Data
The PoC for Project Atlas combines off-chain data from cryptocurrency exchanges with on-chain data from public blockchains. During the initial phase, the project tracked cryptocurrency flows across different geographical locations. By using transactions attributed to centralized exchanges in the Bitcoin network as a proxy for cross-border capital flows, the project indicates that inter-exchange flows are economically significant. However, the methodology acknowledges that these flows may be lower than the actual transaction volumes due to difficulties in determining the country location of exchanges.
Visualizing the Results: Dashboards Showcase Data Aggregation and Analysis
Project Atlas features a front end that includes dashboards to visualize the results of data aggregation and analysis. These dashboards showcase on-chain transfers, the global movement of funds, and other relevant information. The system aims to provide central banks with an overview of cross-border flows and evaluate the relative economic significance of the cryptocurrency ecosystem in different jurisdictions. It will also allow for investigations into the influence of price shocks, financial market developments, and country characteristics on crypto flows.
Expanding Data Sources and Future Developments
As Project Atlas progresses, it plans to incorporate more data sources and move into the next development phase. This includes extracting and analyzing data from Ethereum network nodes and decentralized finance (DeFi) protocols. By expanding the data sources, the project aims to provide a comprehensive understanding of the cryptocurrency ecosystem and its economic relevance.
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