The Bank for International Settlements (BIS) and the Bank of England announced they have completed tech trials demonstrating that they can deliver near real-time data on stablecoins' liabilities and the assets backing them.

Their joint initiative, dubbed Pyxtrial, aims to tackle significant challenges financial watchdogs face. According to a report published on Wednesday, Pyxtrial could also be extended to monitor other tokenized products backed by real-world assets.

Pyxtrial's Capabilities

Pyxtrial has features that allow authorities to pull data directly from issuers' systems to verify on-chain liabilities.

This development follows years of controversy, during which stablecoin issuers were scrutinized for the validity of their claimed reserves. The technology aims to bring transparency and reliability to the stablecoin market.

Stablecoin issuers have faced criticism, especially after the collapse of the former exchange FTX in 2022, leading to a wave of self-regulation efforts.

Several exchanges and issuers have posted their 'proof of reserves' to assure customers and regulators. Proof of reserves verifies that a trading platform or crypto firm has one-to-one backing across the digital assets it holds in custody.

Tether's Approach

Tether Ltd., the issuer of the world's largest stablecoin by market capitalization, regularly posts attestations for reserves it claims back its token. However, Tether concedes that the data available at the time may not reflect the exact tokens in circulation. This highlights the need for a more reliable system like Pyxtrial.

Modular and Customizable

Pyxtrial's approach is described as 'modular' and 'customizable,' allowing regulators to adapt its technology to different setups worldwide.

This flexibility means Pyxtrial could be applied to other digital assets. As a proof of concept, Pyxtrial demonstrated that a quickly developed technological solution could support regulators in tracking liabilities and assets in near real-time.

This would enable authorities to verify that stablecoins are always fully backed, addressing traditional data collection methods' irregular and time-bound nature.

Despite its initial success, Pyxtrial requires further testing and refinement before a full deployment can be rolled out.

Effective implementation and operation require skilled personnel to support the system's users. The project also provides insights into building backend solutions, enabling authorities to interact efficiently with both on-chain and off-chain data.