Crypto distribution is uneven among banks as prudential exposure rises: BIS report

One bank accounts for almost 62% of all crypto asset prudential exposure; almost two-thirds of banks holding crypto are in the Americas.

Around 20% of banks have exposure to crypto assets, a Bank for International Settlements (BIS) report released Feb. 28 found. The majority of those banks are in the Western Hemisphere. 

According to the report, which is based on data from the first half of 2022, 17 Group 1 banks reported approximately 2.9 billion euros in crypto asset prudential exposure and 1 billion euros in crypto assets under custody. A Group 1 bank is one that has Tier 1 capital of more than 3 billion euros and is internationally active. Tier 1 capital is a bank’s equity capital and disclosed reserves.

The 17 banks make up slightly less than 20% of the total monitored. Eleven of them are in the Americas, with four in Europe and two in other parts of the world. Thus, crypto asset holdings represented a tiny fraction of the banks’ holdings:

“In relative terms, prudential exposures make up only 0.013% of total exposures on a weighted average basis across the sample of banks reporting cryptoasset exposures, while cryptoassets under custody make up only 0.005% of total exposures.”

The BIS has instituted standards limiting banks to 2% crypto reserves by the beginning of 2025.

The #Basel_III monitoring report in full is herehttps://t.co/NjKcPTKOxr

— Hyun Song Shin (@HyunSongShin) March 1, 2023

Among the entire set of banks monitored, crypto asset exposure represents 0.003% of total exposures and crypto assets under custody represent 0.001% of the total. Prudential exposure rose 30% over the first half of the year, and custody decreased by 66%. The latter figure was particularly impacted by banks dropping out of the study, the report noted, while the rest of the decrease was down to falling crypto asset market values.

Related: BIS head claims fiat won battle with crypto, Bitcoin community disagrees

A single, unidentified bank accounted for 61.7% of all crypto asset prudential exposure, and four other banks make up 35% of exposure. Clearing and trading created almost three-quarters of all prudential exposure. Bitcoin was the largest underlying exposure, at over 40%, with Coinbase coming in second slightly with under 30%. Ether was a distant third with less than 5%.