Basel Study Shows World’s Biggest Banks Have $9 Billion Crypto Exposure

The Basel Committee on Banking Supervision published the first-of-its-kind study showing that the crypto exposure of some of the biggest banks in the world is somewhere around $9 billion.

Renzo Corrias, the secretariat of the Basel Committee authored the research paper, which said that out of the total risk exposure of banks, their crypto exposure is approximately 0.01%.

Crypto exposure

The BCBS published the study to highlight that the largest financial institution has also entered the crypto space and their crypto exposure has reached $9 billion.

The Basel Committee on Banking Supervision (BCBS) is a global entity that has members belonging to central banks and other financial institutions from a myriad of countries all over the world.

Secretariat Renzo Corrias penned the study and its aim is to provide a primary global standard for the prudent treatment of the crypto exposure of banks.

The report from Corrias said that the total exposure of banks to cryptocurrencies was around 9.4 billion euros, which makes it just 0.14% of the total exposure on the basis of the weighted average across the number of banks that had reported said exposures.

When the entire sample of banks that were part of the monitoring exercise of Basel III are considered, which means those that do not report crypto asset exposure, this figure comes down to 0.01%.

The study

A total of 19 global banks submitted data to BCBS for the research and ten of these financial institutions belonged to the Americas.

There were seven European banks and the remaining two banks came from other regions of the world.

Corrias stated that the banks were only a small group out of the total 182 financial institutions that BCBS had considered for conducting their monitoring exercise.

The exposure to crypto assets that were reported by banks was mostly to bitcoin (BTC), which accounted for about 31% of the exposure.

Next came Ethereum, which accounted for about 22% of the exposure. Other crypto assets that the financial institutions had exposure to included Ripple (XRP), Stellar (XLM), Litecoin (LTC), Solana (SOL), and Cardano (ADA).

They were also exposed to stablecoins backed by the US dollar.

Different categories

Corrias went on to explain that the exposure of banking institutions to crypto assets comprised three different categories.

These included custody/insurance/wallet services, market-making and clearing services as well as crypto lending and holdings.

Of the leading five activities that make up the crypto exposure of banking institutions, wallet or custody services are taking the top spot.

The exposure of banks to the crypto space does not come as a surprise because these assets are becoming more and more mainstream.

The demand by clients of banking institutions for crypto-related products and services has driven financial institutions to delve into the crypto market or risk losing their customers to competitors.

With crypto regulatory frameworks under development in a number of jurisdictions all over the world, it is likely that this exposure is going to increase in the future.