A central bank test lab has unveiled its prototype Bitcoin tracking system, known as “Atlas”, aimed at providing authorities worldwide with comprehensive insights into the usage patterns of the cryptocurrency. The project, spearheaded by the Bank for International Settlements (BIS), originated at the Dutch central bank over five years ago but has recently gained prominence due to the tumultuous events that have rocked the cryptocurrency industry over the past 18 months.
Atlas operates as a “proof of concept” platform, meticulously collecting data from both publicly available “on-chain” crypto ledgers and the more elusive “off-chain” data reported by select exchanges and users. While this information offers a broad overview of cryptocurrency activities, the inherent anonymity of crypto wallets and the absence of location specification by owners render the data less precise.
The BIS, recognising the significance of this endeavour, highlighted that the initial data analysis from the platform has already revealed substantial cross-border flows in economic terms, albeit acknowledging the existing uncertainties in the crypto landscape. This initiative has gained prominence in light of concerns among regulators about the decentralised nature of cryptocurrencies, particularly following the collapse of widely-used stablecoin pair Luna and TerraUSD, along with the FTX platform last year.
The BIS’s “innovation hub” prototype generates informative “dashboards” that depict crucial insights such as the conversion of Bitcoin into U.S. dollars at specific times and locations worldwide. These dashboards also shed light on the adoption rates and the relative importance of crypto markets as they wax and wane in popularity.
Cross-border crypto flows have assumed paramount importance for central banks in the context of cross-border payments, economic analysis, and balance of payments statistics, as these flows often constitute a significant but hard-to-quantify portion of cross-border transfers.
The BIS emphasised the necessity for central banks to acquire firsthand knowledge of cryptocurrencies and decentralised finance (DeFi) to comprehend the risks and opportunities they present to the financial system. To facilitate this, the BIS has announced the deployment of these dashboards to a select group of “test” central banks, allowing them to provide feedback and suggestions for further development.
With the introduction of the Atlas prototype, a wave of new developments has surfaced, each employing diverse tools and methodologies to comprehensively map global Bitcoin activities. Among these initiatives are:
Blockchain Explorers: Online blockchain explorers like blockchain.info and blockchair.com allow users to navigate and search the Bitcoin blockchain, offering insights into transaction histories, wallet addresses, and other data. These explorers essentially create a map of Bitcoin’s transaction history worldwide.
Mapping Bitcoin Transactions: Researchers and data analysts often employ geographical mapping techniques to visualise Bitcoin transactions. By associating transaction data with geographical locations, such as IP addresses or physical locations when available, these maps provide a glimpse into where Bitcoin transactions occur globally. Although not real-time, they offer valuable insights into the global distribution of Bitcoin transactions.
Decentralised Applications (DApps): Some decentralised applications or platforms built on blockchain technology may enable the development of global mapping systems. These applications could empower users to interact with a global map, displaying various data related to Bitcoin transactions, addresses, and related information.
The Bank for International Settlements’ Atlas project thus represents a significant leap forward in the effort to monitor and understand the global usage of Bitcoin. As cryptocurrencies continue to gain traction and evolve, initiatives like Atlas become essential tools for regulators and central banks to navigate the ever-changing landscape of digital finance. The availability of these dashboards to test central banks signifies a crucial step toward fostering a deeper understanding of cryptocurrencies and their impact on the financial system, ultimately contributing to more informed and effective regulation.
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