Stablecoin Collateral Monitoring Solution Developed

The Bank for International Settlements (BIS) and the Bank of England (BoE) unveiled a prototype solution that can semi-automatically monitor reserves of stablecoins and other tokenized assets. The solution passed the proof-of-concept stage, and implementation will depend on regulatory developments.

The Bank for International Settlements (BIS) and the Bank of England (BoE) unveiled the results of Project Pyxtrial, a joint initiative to create a solution for real-time monitoring of stablecoin reserves.

The solution is designed to collect on-chain data from blockchains and platforms that host the assets used to back stablecoins. This data is then matched against reserve asset data provided by issuers. The system is built so that data is collected and matched every hour.

The developed solution consists of:

• data model;
• database;
• application programming interfaces (API).

The processed data will be available to regulators and supervisors through a customizable dashboard. The system needs to be fully automated, as regulatory requirements for issuers may vary from region to region. In particular, users will have the authority to determine mandatory data from issuers and the frequency of submission.

According to the report, Project Pyxtrial is only a proof-of-concept at this stage. Despite its benefits, the solution isn’t ready for launch, as the regulatory framework it must rely on is still being formed.

As of the end of 2023, only about 60% of countries had a regulatory framework for the stablecoin market.

The report also states that the solution is technically designed as a modular system, so it can be easily adapted to monitor other digital assets, such as tokenized securities or bonds. The application interface will allow the solution to easily adapt to specific regulatory needs and integrate into existing systems. The developers also envisioned the possibility of making improvements in the future.

One of the most challenging tasks in a full system launch is maintenance. The authors of the report note that operators will need extensive knowledge of blockchain and regulations to manage the solution. Therefore, training system users can be quite a complex process.

The report also indicates that Project Pyxtrial used some data provided by Project Atlas, another BIS initiative created to monitor crypto payments, for the proof-of-concept.

Concerns about the impact of stablecoins on the global economy are actively growing, so regulators in various countries are updating the requirements for issuers of stablecoins. New rules were recently proposed in Hong Kong, the UAE, and the European Union.

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