The Bank for International Settlements (BIS) is joining with financial services giants De Nederlandsche Bank and Deutsche Bundesbank in an initiative to explore the macroeconomic relevance of cryptocurrencies and decentralized finance (DeFi), the global financial institution announced on Wednesday.Project Atlas will gather data about blockchain-based networks’ usefulness and share the findings with payments organizations, regulators and economists, who are looking to better understand the technology’s role in financial services.
“Working in the intersection of economics, finance and computer engineering, we are developing a new and important public good for central banks globally,” said Cecilia Skingsley, head of the BIS Innovation Hub, in the announcement. “The data on cross-border flows are relevant for areas like payments and macroeconomic analysis,”
BIS is a 93-year-old, Swiss-based institution that is comprised of central banks and focused on improving financial and monetary stability.
Project Atlas will collect on-chain data from crypto exchanges and public blockchains. The project will use transaction data from exchanges in the Bitcoin network and their locations to represent cross-border capital flows.
The data representing the flow of money into and out of countries to exchanges are then presented on a reader-friendly virtual globe.. Such information could help government agencies worldwide develop smarter crypto regulation, which has ranked among the industry’s most troublesome issues.
Meanwhile, central bankers have been concerned about the risks of crypto to markets. A 40-page report accompanying the Atlas announcement cited data that about 70% of reported trading volumes are wash trades. Wash trades are a type of market manipulation in which traders buy and sell an asset within a short period, often on different exchanges, to influence the direction of prices.
In a July 2023 report, BIS wrote: “As growth is driven mainly by the speculative influx of new users hoping for high returns, crypto and DeFi pose substantial risks to (especially retail) investors. In sum, crypto’s inherent structural flaws make it unsuitable to play a constructive role in the monetary system.”
BIS first introduced the possibility of a data platform in mid 2022.
Preliminary data has shown that flows are economically substantial and have uneven geographic distribution across regions.
The initial proof of concept phase for Project Atlas is targeting the international flows of digital assets. Other goals include improving the data collection methodologies and furthering development of the platform.
“Atlas enables a variety of use cases,” said Burkhard Balz, a Deutsche Bundesbank executive board member. “Researchers can structurally analyse the micro data while policymakers can access tailored dashboards for insights at a glance. I am excited about the potential and future developments of this project.”