According to the Bank for International Settlements’ (BIS) most recent BASEL III Monitoring report, the exposure of international banks to crypto-assets is still minimal and will likely continue to fall through 2022.
Out of the 181 institutions that make up the BASEL III monitoring sample, just 17 Group 1 banks revealed exposure to crypto-assets, according to the research. There are 17, with 11 based in the Americas, 4 in Europe, and 2 elsewhere in the world. The questioned banks were not identified in the study.
At the end of June 2022, these lenders’ total prudential exposure to crypto assets was €2.9 billion, while the value of the crypto assets they had in custody was €1.0 billion.
Prudential exposures are described as “direct crypto-asset exposures, including synthetic or derivative exposures, that give rise to credit or market RWA.” This includes a bank directly owning cryptocurrency, owning crypto-related equities such as Coinbase, trading cryptocurrency or crypto-related assets and instruments, and clearing crypto-related derivatives.
Prudential crypto-asset exposures at these banks account for only 0.013% of total exposures, while crypto-assets under custody account for only 0.005% of total exposures. When compared to the overall sample size of 181 banks, the percentages reduce to 0.003% and 0.001% of total exposures, respectively.
Banks’ crypto-assets under custody plummeted 66% from the end of June 2021, but their prudential exposure to crypto-assets increased by 30%.
According to the analysis, around 40% of the decrease in crypto-assets under custody may be linked to two banks failing to register their crypto exposures in 2022, while the rest can be attributed to the general decline in crypto value compared to the 2021 bull market. It went on to say that the two banks that did not take part in the monitoring “specialized on crypto-asset activity.”
Clearing and trading activity account for the majority of banks’ prudential exposure to crypto-assets, accounting for 41% and 32% of overall prudential crypto-asset exposure, respectively. Meanwhile, banks’ holdings account for 10% of the exposure, with the remainder coming from loans to enterprises with crypto-asset exposure and other activities.
Bitcoin is the most important underlying asset in banks’ prudential crypto-asset exposure, accounting for 43% of the total. In comparison, Ethereum accounts for only 4% of the underlying assets, while stocks and debt issued by COINBASE account for 29%.
