BIS test lab develops bitcoin monitor system

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BIS test lab develops bitcoin monitor system

LONDON : A global central bank test lab has developed a prototype bitcoin monitor system aimed at giving authorities a clearer picture on how, when and where the cryptocurrency is used.

Atlas, the project that began at the Dutch central bank more than five years ago, has been underscored by a series of chaotic collapses in the crypto industry over the last 18 months.

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

The data then provides a rough picture of cryptocurrency activity, although it is not always accurate, as crypto wallets can be set up anonymously and without the owner's specific location.

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

Regulators are worried that the decentralized nature of cryptocurrencies makes them a risk, particularly after the collapse of widely-used stablecoin pair Luna and TerraUSD and the FTX plaform last year.

The BIS' 'innovation hub' prototype produces '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.

Crypto market adoption and relative importance can be analyzed by examining the adoption and importance of crypto markets as they become more or less popular.

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

Some countries may be unable to quantify their cross-border transfers because of the current gaps in data.

It added that the dashboards were now made available to a group of 'test' central banks to gather feedback and for further development.