BIS to create a digital currency market intelligence platform in wake of market collapse

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The Bank for International Settlements (BIS) is creating a new innovation hub in Europe. Called the Eurosystem Center, several of the hub’s projects at kick-off will focus on addressing risks emanating from the digital currency market. 

In a press release announcing the creation of the hub, the BIS stated that its first project would be to create a digital currency market intelligence platform. The need for the project has been highlighted by “the collapse of many stablecoins and decentralized finance (DeFi) lending platforms,” the BIS noted. 

The BIS asserted that stablecoins and DeFi protocol crashes are linked to their lack of transparency in data reporting. It said that data on asset backing, trading volumes, and market capitalization in the sector is currently self-reported, unregulated, and don’t provide comprehensive insight. 

“The project’s goal is to create an open-source market intelligence platform to shed light on market capitalizations, economic activity, and risks to financial stability,” the BIS added. 

Follow-up assignments of the Eurosystem Center innovation hub include a post-quantum cryptography project and more research on central bank digital currencies (CBDCs). The hub will “investigate and test potential cryptographic solutions” that can protect payment systems from the improved processing power of quantum computing. 

It will also build on other pilot projects the BIS has conducted on the security of retail CDBCs. The hub will open in the coming months, according to the announcement. It will have locations in Frankfurt and Paris and will work with all 19 euro area central banks and the European Central Bank (ECB). 

The BIS, digital currencies, and CBDCs

The BIS’s project on a market intelligence platform is coming in the wake of the market moving crash of Terra’s UST stablecoin and the recent liquidation problems faced by DeFi lending platforms like Celcius and BlockFi. 

The BIS, which is the central bank to other central banks, has often warned of risks from the digital currency market. In a recent report, the body called for international cooperation in regulating digital currency exchanges. 

The report pointed out that centralized exchanges turned out to be just like traditional financial institutions that digital currencies set out to disrupt. Hence, it recommended commensurate regulations to protect the increasing number of institutional investors in the space. 

The BIS has also urged central banks to ramp up their development of CBDCs, providing support in the form of pilot projects. As per CoinGeek’s recent report, the BIS just announced a retail CBDC testing with the central banks of Israel and Hong Kong. Previous tests involved Singapore and Australia.

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