A worldwide central bank test lab has created a prototype Bitcoin surveillance system to give regulators a clearer view of how, when, and where the cryptocurrency is used.
The Bank for International Settlements (BIS) initiative, code-named Atlas, started at the Dutch central bank more than five years ago. Still, during the last 18 months, several disorderly failures in the cryptocurrency sector have highlighted its potential worth.
Atlas developed a “proof of concept” platform that collects information from crypto ledgers that are accessible to the general public (“on-chain”) as well as less accessible (“off-chain”) information provided by a select few exchanges and users.
The data then gives a broad picture of Bitcoin activity. However, it is not always exact because cryptocurrency wallets can be created anonymously without the owner indicating a location. The BIS acknowledged the “uncertainty” but stated that an early study of the data gathered by the platform “indicates that cross-border flows are substantial in economic terms and unevenly distributed across geographical regions.”
Regulators are growing more worried that cryptocurrencies pose a danger due to their decentralized character, particularly in light of the collapse of the FTX platform and the widely-used stablecoin pair Luna and TerraUSD last year.
The BIS’s “innovation hub” prototype creates “dashboards” that display data like how many bitcoins are being changed into US dollars at specific times in specific regions. As they gain or lose popularity, they can also offer information about the adoption and relative significance of the crypto markets.
According to the BIS, central banks should pay close attention to cross-border crypto flows when considering cross-border payments, economic analysis, and balance of payments statistics.
They could make up a sizeable portion of cross-border transfers for some nations. However, it is difficult to estimate them now due to data shortages. The risks and opportunities that crypto and DeFi provide to the financial system must be better understood by central banks, according to the BIS.
It was stated that a set of “test” central banks would now have access to the dashboards to get input and continue development.
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