- BIS suggests a decentralized finance platform may regulate the crypto market, using Project Atlas data.
- Cecilia Skingsley emphasizes cross-border data’s importance for central banks in payments and analysis.
- BIS warns of crypto data manipulation and supports exchanges disclosing wallet details for data-driven supervision.
According to a report published on Wednesday by the Bank for International Settlements (BIS), a forthcoming decentralized finance data platform might serve as the foundation for regulating participants in the cryptocurrency market. The proof-of-concept report, co-released with the Dutch and German central banks, indicates that Project Atlas was initially employed to chart substantial international transactions occurring between cryptocurrency exchanges.
Cecilia Skingsley, head of the BIS Innovation Hub, stated that they are developing a crucial public asset for central banks worldwide. She emphasized that data on cross-border flows is pertinent to domains like payments and macroeconomic analysis.
The study, which initially focused on transactions within the Bitcoin network, noted that while identified flows between cryptocurrency exchanges constitute a relatively small portion of the overall on-chain network traffic, they are economically substantial and significant. The project combines off-chain data obtained from cryptocurrency exchanges with public blockchain data collected through the operation of a node, as detailed in the document.
“The output of Project Atlas could serve as a starting point for preliminary assessments and inform the drafting of data reporting requirements and regulation of crypto market actors.”
a study released by the Bank for International Settlements
Central bankers are seeking a deeper understanding of the risks associated with markets that are often challenging to comprehend. Although BIS initially introduced the concept of a “cryptocurrency market intelligence platform” in June 2022, recent crises, such as the collapse of the FTX exchange, have underscored the hazards associated with unregulated entities operating in opaque markets.
The BIS report, which represents central banks from around the world, cautions that cryptocurrency data can be subject to “manipulation or distortion.” It presents data suggesting that up to 70% of activity on certain exchanges involves wash trading, an illicit practice in which the same traders buy and sell the same asset with the intent to deceive and manipulate markets.
Prominent centralized exchanges like Binance have aimed to alleviate investor apprehensions by disclosing information about the wallets under their control. This practice, referred to as proof of reserves, is a means of providing reassurance. According to BIS, it has the potential to be employed for innovative methods of data-driven oversight in the future.
