BIS test lab develops Bitcoin tracking system

BIS test lab develops Bitcoin tracking system

LONDON : A global central bank test lab has developed a prototype Bitcoin tracking system that aims to give authorities a clearer picture on how, when and where the cryptocurrency is used.

Atlas, a new project by the Dutch central bank, began more than five years ago, but its potential value has been underscored over the past 18 months by a series of chaotic collapses in the crypto industry.

Atlas created a 'proof of concept' platform that sucks data from both publicly available 'on-chain' crypto ledgers as well as harder to source 'off-chain' data reported by only some exchanges and users.

Crypto wallets can be set up anonymously and without the owner specific location, providing a rough picture of cryptocurrency activity, though it is not always accurate.

The BIS said it acknowledges the uncertainty, albeit acknowledging the 'uncertainty'.

Regulators are worried about the decentralization of cryptocurrencies, especially after the collapse of the widely-used stablecoin pair Luna and TerraUSD and the FTX plaform last year.

The BIS' 'innovation hub' prototype consists of 'dashboards' that show information such as how many bitcoins are being converted into U.S. dollars at certain times in certain regions of the world.

As Cryptocurrencies become more popular, they can provide insights into the adoption and relative importance of these markets as they gain or decrease in popularity.

The BIS said that cross-border crypto flows are particularly relevant for central banks in the context of cross-border payments, economic analysis and balance of payments statistics.

Some countries may be hard to quantify because of the current data gap, which can lead to a significant portion of cross-border transfers.

The Dashboards are now being made available to a group of 'test' central banks to gather feedback and for further development.