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BIS launches new stablecoin project, crypto and DeFi monitoring platform

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(Kitco News) - The Innovation Hub of the Bank of International Settlements (BIS) unveiled their 2023 priorities, and among the ongoing projects exploring central bank digital currencies (CBDC), cybersecurity, and data monitoring, they announced a new initiative focused on stablecoins.

Pyxtrial is a new project based at the Innovation Hub’s London Centre which aims to “enable systemic monitoring of stablecoins.” The project is named after the ‘trial of Pyx,’ a long-running British ceremony that began in 12th-century London where the head of the Royal Mint would present new coins for circulation to metallurgical assayers and financial experts for verification. The boxes containing the new coins gave the ceremony its name, as the word pyx derives from the Greek pyxis, meaning wooden box.

Pyxtrial aims to create a digital version of this verification process for stablecoins, which are among the most important and contentious digital assets in the cryptosphere.

Stablecoins such as Tether USD (USDT) and USD Coin (USDC) are the essential financial instruments that underpin cryptocurrency exchange, as they enable investors to instantly move between other digital assets and these quasi-fiat currencies.

But the depegging and collapse of some algorithmic stablecoins, most notably TerraUSD, and doubts about the true reserves behind even the fiat-backed stablecoins have made these tokens a particular area of focus for regulators and central banks.

The goal of Pyxtrial is to develop a technology platform that can help to monitor stablecoin's balance sheets. “Most central banks lack tools to systemically monitor stablecoins and avoid asset-liability mismatches,” they wrote. “[Pyxtrial] will investigate various technological tools that may help supervisors and regulators to build policy frameworks based on integrated data.”

The Innovation Hub is also developing tools for monitoring cryptocurrencies and decentralized finance (DeFi) in real time. The Atlas project is an information platform designed to address the lack of vetted data that makes it difficult to assess the economic potential of these markets.

“While there seems to be an abundance of data, this data is provided by the industry itself and in some instances, it is hard to distinguish genuine data from fake transactions or fake market capitalizations” said Raphael Auer, Head of the Innovation Hub’s Eurosystem Centre in a recent video. “The goal of this project is to create an open-source market intelligence platform that adds layers of data vetting and that makes novel statistics freely available.”

Auer said Atlas would combine on and off chain data to offer insights into “market capitalizations, economic activity and cross-border flows.”

CBDCs and improvements in payments systems remain a major focus for the BIS in 2023, as they are for central banks around the world, and they account for 15 of the 26 active projects between 2020 and 2022. “This emphasis reflects the interests and priorities of central banks and the G20 countries' programme to improve cross-border payments,” they wrote.

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