By George Ward
The Atlas Project
A recent Bank for International Settlement study posits that crypto trading has become substantial and economically viable. Accordingly, the study proposes the development of a decentralized finance data platform to ensure future regulation of market players in the crypto space.
According to a study released on Wednesday by the Bank for International Settlements (BIS), the emergence of a novel decentralized finance data platform could serve as the cornerstone for future regulations governing cryptocurrency market participants. This platform, Project Atlas, has already been trialed for charting significant global transactions across several crypto exchanges.
The BIS documented this latest effort in a proof-of-concept report in collaboration with the central banks of the Netherlands and Germany. The information represents a significant step forward in understanding the complex interactions within the crypto ecosystem, and it’s a critical step in establishing a regulatory framework.
Furthermore, Project Atlas signals the pursuit of a transparent and accountable crypto ecosystem. Part of its aim is to be a transformative tool for global regulators to map cross-border flows between crypto trading platforms comprehensively.
The initiative highlights the concerted effort to demystify the complex decentralized finance (DeFi) ecosystem. It also aims to usher in transformative systems to enhance international financial institution cooperation.
What To Expect
Cecilia Skingsley, the head of the BIS Innovation Hub, explained that the organization’s undertaking was to create a vital public resource and reshape the global central banking system. According to her, this project aims to provide comprehensive insights into cross-border financial settlements, a critical aspect for domains like payments infrastructure and macroeconomic analysis.
The study, which began by examining transactions on the Bitcoin network, highlighted the immense economic significance of flows between digital asset exchanges. It added that while these flows may account for a small proportion of the overall on-chain network traffic, their economic impact is noteworthy.
The Project Atlas trial phase results will serve as a basis for conducting preliminary assessments. Furthermore, the data derived from this project will influence the formulation of data reporting requirements and regulatory frameworks for the various actors in the crypto market.
It is worth noting that Project Atlas combines off-chain data from several crypto exchanges with public blockchain data to run a dedicated node.
Central Bank Seeks Crypto Market Insights
Meanwhile, several central banks are taking proactive steps to establish a comprehensive “cryptocurrency market intelligence platform” in a collective move to gain a deeper understanding of the intricacies involved in this dynamic market. This initiative, which the BIS first proposed in June 2022, is one of its responses to recent crises in the crypto space, notably the collapse of the FTX exchange.
The incidents highlighted the dangers posed by unregulated entities that have continued to fuel regulators’ intent to ensure oversight. Unfortunately, some of these entities operate in regions with no clear regulations.
Hence, the BIS report warns about the vulnerability of crypto data, emphasizing its susceptibility to manipulation and distortion from players within the sector. Per the report, 70% of purported activities on certain crypto exchanges can be regarded as wash trading.
Wash trading is an unlawful practice where traders simultaneously buy and sell the same asset to create the impression of huge transaction volume on specific crypto platforms and exert undue influence on market dynamics.