In a fascinating development for the understanding and regulation of the Blockchain sector, the Bank of International Settlements (BIS) with various European Central banks, including the Deutsche Bundesbank, De Nederlandsche Bank, European Central Bank and the Bank of France, have been successful in the development of a proof of concept (PoC) system set to track both on-chain and off-chain transactions from cryptocurrency exchanges and public blockchains such as Bitcoin. Having been dubbed ‘Project Atlas’, this concept aims to provide an in-depth analysis of the macroeconomic relevance of cryptocurrency markets and decentralized finance (DeFi) protocols.
Project Atlas is expected to offer much-needed transparency and potential mitigation against financial stability risks thundered by high-profile incidents such as the Terra/LUNA algorithmic stablecoin collapse in 2022. The first proof of concept saw Project Atlas tracking cryptocurrency flows across geographical locations.
Crucially, the project amalgamates off-chain data from cryptocurrency exchanges with on-chain data harvested by nodes from public blockchains. Considering the highly globalised nature of cryptocurrency, the project facilitates the cross-border flow analysis of currencies like Bitcoin by attributing transactions not only to their original exchanges but also to the locations of these exchanges.
Despite its groundbreaking nature, there has been skepticism about the use of this PoC, as some argue that the country location of exchanges is not easily discernible. Hence only lower-bound estimates are likely to be concluded from such an approach. Despite this, Project Atlas in its initial pilot recorded “significant and substantial economically” inter-exchange flows. Furthermore, the project is set to offer a comprehensive overview of cross-border flows, thereby allowing Central Banks to evaluate the cryptocurrency ecosystem’s economic significance across multiple jurisdictions.
As an ever-adapting and flexible entity, Project Atlas is reportedly set to continue integrating more data sources into its arsenal. There are also expectations of Ethereum network nodes and DeFi protocols being extracted for data analysis. Reflective of this, Project Atlas’s front-end features show dashboards visualising the product of data aggregation and analysis, including on-chain transfers and global fund migrations.
In conclusion, the issue of centralised control of a decentralised market structure remains at the forefront of discussions around regulation. The project’s potential to track, analyse and provide relevant insights into the crypto market and DeFi protocols could substantially improve regulatory measures and control, though concerns about potential overreach and the feasibility of accurate tracking remain notable points of contention.
Source: Cointelegraph
