Banks’ Crypto Asset Holdings May Be Just 0.01% of Total Risk Exposure, Basel Study Finds

The world's largest banks are exposed to about 9.4 billion euros (US$9 billion) of crypto assets, a study by the Basel Committee on Banking Supervision found. The international standard-setter is considering new rules for the capital that lenders must hold against innovative assets.

The exposure, mainly client services involving bitcoin BTC$89,629.86 and ether ETH$3,125.57, represents 0.14% of the total exposure to risk from the 19 banks who sent in data, or just 0.01% across all banks, and the survey – the first of its kind – is set to have a clear impact on policy.

“The template [sent to banks] was specifically designed to support the Committee’s two consultative documents on the prudential treatment of banks’ crypto asset exposures, which were published on 10 June 2021 and 30 June 2022,” the study, penned by Renzo Corrias of the Committee’s Secretariat, said.

Corrias was referring to two documents in which the Basel Committee – a grouping of national regulators that sets safety norms for banks designed to avoid 2008-style financial crises – tentatively set out tough rules that would govern how banks can get into crypto.

The plans set a tough capital requirement for unbacked currencies like bitcoin and ether as well as algorithmic stablecoins. The planned regulations could restrict lending and mean that, in practice, banks don’t have as much incentive to get into those markets. Lighter rules would apply to hedged exposures and other kinds of asset-pegged stablecoin.

Read more: Banks’ Bitcoin Holdings Should Be Capped, Basel Committee Proposes

The great majority of exposures are bitcoin and ether or instruments based on those two currencies, the study said. The figures are dominated by services banks provide for others, such as custody, clearing, and market making. Only a handful of banks are fully involved in directly holding or lending crypto.

But with only a small number of banks replying and assets heavily concentrated in a couple of those institutions, the results may not provide an accurate picture, Corrias warns.

“While they are helpful in providing a broad indication of banks’ crypto asset activity, they should interpreted with a degree of caution,” the study said.