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) and ether (ETH), 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.
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.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.