In an unprecedented analysis, the Basel Committee on Banking Supervision (BCBS) has unveiled a comprehensive report detailing the involvement of banks in crypto assets like Bitcoin, Ethereum, and XRP. The data, which marks a significant step in understanding institutional engagement in the crypto sector, reveals that total crypto exposures reported by banks stand at approximately €9.4 billion.
Overall, 19 banks reported their crypto assets: 10 banks are from the Americas, 7 banks are from Europe, and 2 banks from the rest of the world. These 19 banks make up a relatively small part of the wider sample of 182 banks considered in the Basel III monitoring exercise, accounting for 17.1% of total risk-weighted assets (RWA) and 20.9% of the overall leverage ratio exposure measure (LREM), with banks from the Americas contributing to approximately three-quarters of these amounts.
The €9.4 billion in crypto holdings represent a mere 0.05% of total exposures on a weighted average basis among the banks reporting crypto exposures. When extended to the entire sample of banks in the Basel III monitoring exercise, this percentage further reduces to 0.01%.
Bitcoin, Ethereum, And XRP Top The List
A closer examination of the composition of these crypto exposures shows a dominant preference for major cryptocurrencies. Bitcoin (BTC) accounts for 31% of the exposures, followed by Ether (ETH) at 22%. Additionally, a variety of instruments based on Bitcoin or Ether constitute 35% of the exposures.
This means that together, Bitcoin and Ether-related instruments make up almost 90% of the reported exposures. Other notable cryptocurrencies in the banks’ portfolios include Polkadot (2%), XRP (2%), Cardano (1%), Solana (1%), Litecoin (0.4%), and Stellar (0.4%). For example, XRP’s percentage translates to total positions worth €188 million or $205 million.
The report categorizes the crypto activities of banks into three broad groups. First, ‘Crypto holdings and lending’ includes direct holdings and investments in crypto and lending activities related to them. This category also encompasses the issuance of crypto-backed by the bank’s assets. Second, ‘Clearing client and market-making services’ involve trading on client accounts, clearing crypto derivatives, and underwriting initial coin offerings, among other activities.
The third category, ‘Custody/wallet/insurance and other services,’ is about providing custody or wallet services for crypto and facilitating client activity in crypto-related products. Notably, custody, wallet, and insurance services account for half of the reported crypto exposures, with clearing and market-making services making up another 46%.
Delving deeper into these categories, the most significant subcategories in terms of exposure are providing custody and wallet services (14.4%), trading crypto on client accounts (13.4%), and facilitating client self-directed trading (11.7%). Securities financing transactions (SFTs) involving crypto and issuing crypto-related securities while hedging the underlying exposure follow closely. The distribution of activities is notably varied across the banks, with most having exposures primarily or exclusively in one activity group.
At press time, the XRP price stood at $0.6094.