BIS teams up with Bank of England to monitor stablecoin reserves

The Bank for International Settlements has announced the launch of a joint project with the Bank of England that aims to track stablecoin reserves.

The Bank for International Settlements Innovation Hub has announced a new joint pilot in collaboration with the Bank of England aimed at auditing the assets that back stablecoins. The so-called “Project Pyxtrial” focuses on leveraging technology to provide auditors with “near real-time data on the liabilities and backing assets of stablecoins,” the BIS said in its announcement on July 31.

Although the technical details of the project are not yet clear, BIS says the project has features such as data collection, storage and analysis that will enable faster response to potential risks.

The project is also understood to support APIs, allowing different parties to connect to it. The BIS noted that the project has already demonstrated that “balance sheets of asset-backed stablecoins can be audited,” but acknowledged that a successful deployment would require regulators to use “a multi-disciplinary team to implement and operate.”

Project Pyxtrial features | Source: The Bank for International Settlements

According to the BIS, Project Pyxtrial has the potential to extend beyond stablecoins and enable the tracking of other tokenized products backed by real-world assets, helping regulators “proactively detect issues in stablecoin backing and assist in the development of policy frameworks based on integrated data.”

The scrutiny of stablecoin reserves has been a persistent issue in the crypto industry. Europe’s regulatory framework for digital assets, the Crypto Assets Market — also known as MiCA — was expected to address these concerns by imposing strict transparency, compliance, and reserve requirements on issuers before they can offer stablecoins to consumers in the European Union.

However, not all stakeholders in the industry appear to be pleased; Tether (USDT) CEO Paolo Ardoino expressed concerns in a recent interview that MiCA regulations on stablecoins could pose systemic risks to banks due to excessive cash reserve requirements.