The BIS and European Central Banks Develop Proof-of-Concept System to Track Crypto Assets
The Bank for International Settlements (BIS) has partnered with the European Central Bank, Banque de France, Deutsche Bundesbank, and Nederlandsche Bank to create a Proof-of-Concept (PoC) system called Project Atlas. This system aims to monitor on-chain and off-chain transactions on public networks, including Bitcoin, in order to track the global flow of cryptocurrency assets.
Project Atlas seeks to improve how financial authorities deal with crypto assets and their issuers while monitoring international asset flows. By gathering data from crypto exchanges and public blockchains, the system allows for data vetting and provides users with tools to evaluate the economic significance of these markets more accurately.
Market Manipulation: The Importance of User Protection
The lack of regulatory control over decentralized finance (DeFi) and related services has resulted in increased fraud and industry implosions. Regulators have struggled to gather the necessary data to prevent such incidents. The International Monetary Fund (IMF) and the Financial Stability Board (FSB) warn that widespread adoption without sufficient regulation can undermine government policies.
Project Atlas addresses this issue by utilizing robust analytical indices to analyze data, which will be shared with the global central bank community. This will enable a structural analysis of asset flows and investigations into the influence of price shocks, financial market developments, and country characteristics on crypto flows.
BIS Encourages Central Banks to Adopt Custom Platforms
While blockchain intelligence sites provide insights on crypto transactions, the information is often limited to trading and not tailored to the needs of regulators. Additionally, tracking and utilizing crypto and DeFi transactions is more challenging than traditional financial assets, increasing regulatory risks.
Gathering information across multiple chains is often a “black box” for central banks, making it difficult to gather data across their jurisdiction. Moreover, bad actors and industry executives may manipulate key data, such as transaction volumes, for personal gain.
Project Atlas helps central bank regulators create a safe investment space by minimizing the risks of fraudulent activities and providing tailored data for their regulatory needs.
Hot Take: The Importance of Tracking Crypto Assets
The collaboration between the BIS and European central banks in developing Project Atlas demonstrates the growing recognition of the need to track and regulate crypto assets. With the rise of decentralized finance and the potential risks associated with it, effective monitoring is crucial to protect users and maintain market integrity. By leveraging data from crypto exchanges and public blockchains, Project Atlas aims to provide regulators with the necessary tools to evaluate the economic significance of these markets accurately. This initiative will contribute to the development of a safer and more transparent crypto ecosystem, benefiting both investors and financial authorities.
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