European Central Bank Wants Central Banking Committee To Increase Surveillance on On-Chain Data
The European Central Bank (ECB) has recently released a new report stating that it plans to improve its surveillance on the on-chain data to better monitor the working of digital assets.
In the report titled “Understanding the crypto-asset phenomenon, its risks and measurement issues,” the ECB mentions of already having developed a system that leverages all the “high-quality” data available online to better identify how the use of cryptocurrencies and its growing dominance can potentially affect the monetary policies and the risk its poses to the financial stability and other market infrastructure.
The report argues that the degree of connection between the crypto world and the global economy will ultimately determine the impact crypto assets will have on the real economy. Thus, it states that ECB need to take more time and use better methods for deeper qualitative and quantitative analysis of the digital currency market.
Although the crypto markets and the blockchain technology provide higher transparency, the report states that the half-hearted regulatory measures have complicated things for the systematic organization of the data collection methods.
The report states that the existing available data leaves several “gaps and challenges” like the exposure of payment services and financial institutions to digital currency assets. Thus, going further into the details of collecting accurate information and data, the ECB notes:
“Specifically, it is hard to retrieve public data on segments of the crypto-asset market that remain off the radar of public authorities; some relatively illiquid trading platforms may be affected by wash trading; and there is no consistency in the methodology and conventions used by institutionalized exchanges and commercial data providers. Moreover, new and unexpected data needs may well arise with further advancements in crypto-assets and related innovation.”
The report also mentions that going ahead, the ECB will continue to work on more granular and intrinsic details and “will continue to work on indicators and data by dealing with the complexity and growing challenges encountered in analyzing on-chain and layered protocol transactions.”
The report also talks of off-chain transactions which are conducted off the blockchain platform but later integrated back on-chain. The ECB said that it will strengthen and bolster the “availability and transparency” of the reported data and will thereby create some best practices for the “indicators on crypto assets”.
To do this, the ECB plans to take notice and monitoring of “relatively illiquid crypto trading platforms that may be affected by wash trading” which takes into consideration the “lack of consistency in the methodology and conventions used by institutionalized exchanges and commercial data providers.”