Banks across the globe lowered their exposure to certain cryptocurrencies by 43.6% over the past year, the Bank for International Settlements (BIS) said Tuesday.
Total exposure to cryptocurrencies – both to cryptos directly and via derivative exposure – dropped from 61.7% in 2021 to 15.4% in 2022, a report by the BIS Basel Committee on Banking Supervision (BCBS) showed. The change in banks' crypto exposure was mostly due to fewer banks responding to the BIS survey but also other factors like market conditions and banks reducing their exposure possibly due to the BCBS’ global crypto banking rules, the report said. The sample of banks that got involved went down from 182 banks to 126 banks.
Not only has the crypto market experienced a severe crypto winter propelled by the collapse of large companies including crypto lender Celsius Network and crypto exchange FTX, which has led to millions being wiped out of the crypto market in a year, but regulators have also tightened their supervision, which has encouraged a contraction in crypto activity.
The BCBS, which sets global rules for banks, endorsed in December rules that a bank's exposure to certain cryptocurrencies must not exceed 2%. The committee also suggested that crypto holdings should be capped in June earlier that year.
The deadline to implement the crypto banking rules proposed by the BCBS is 2025, but this data suggests banks are already taking action.
Looking at total exposure in the Basel III monitoring exercise the share of crypto exposure “shrinks to 0.003% and 0.001% of total exposures, respectively,” the report said.
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