Central Bank Consortium Launches Groundbreaking Project for Tracking Crypto Transactions
A recent study by the Bank for International Settlements (BIS) in collaboration with the Dutch and German central banks highlights the substantial economic impact of crypto exchange flows. The study introduces Project Atlas, a decentralized finance data platform, which, although currently in its proof-of-concept stage, has the potential to serve as a foundation for future crypto regulations, according to the central banking group.
The primary objective of Project Atlas is to chart significant international flows between different crypto exchanges. Cecilia Skingsley, the head of the BIS Innovation Hub, emphasized the global importance of this initiative, stating that cross-border flow data holds relevance for various areas, including payments and macroeconomic analysis.
While the study acknowledges that the identified flows between crypto exchanges constitute a relatively small portion of the total on-chain network traffic, they hold substantial economic significance. The findings of Project Atlas could be instrumental in initiating preliminary assessments and guiding the formulation of data reporting requirements and regulations for participants in the crypto market. The project combines off-chain data from crypto exchanges with public blockchain data obtained through node operation.
Central bankers are increasingly seeking a deeper understanding of risks within markets that often present challenges in terms of oversight. The BIS initially proposed the concept of a "cryptocurrency market intelligence platform" in June 2022. Recent crises, including the FTX exchange collapse, have underscored the hazards associated with unregulated entities operating in opaque markets.
The report from the BIS, representing central banks worldwide, cautions that crypto data can be subject to manipulation or distortion. It cites data indicating that up to 70% of activity on certain exchanges may involve wash trading, a prohibited practice where the same traders engage in buying and selling the same asset to deceive and manipulate markets.
Notably, major centralized exchanges like Binance have moved to address investor concerns by disclosing details about the wallets under their control. This practice, known as proof of reserves, is viewed by the BIS as a potential tool for novel data-driven supervision methods in the future.
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