BIS report finds only 20% of banks have exposure to crypto assets, with Bitcoin and Coinbase leading the way
The majority of these banks are based in the Western Hemisphere, according to a research published on February 28 by the Bank for International Settlements (BIS), and about 20% of banks have exposure to bitcoin assets.
According to the research, which is based on data from the first half of 2022, 17 Group 1 banks—those with Tier 1 capital of at least €3 billion and global operations—reported having a prudential exposure to cryptoassets of about €2.9 billion and having €1 billion in cryptoassets under custody.
Yet, in terms of the banks' total holdings, crypto assets make up a very minor portion, with prudential exposures accounting for just 0.013% of the total exposures and crypto assets under custody accounting for just 0.005%.
By the start of 2025, the BIS has already established regulations restricting banks' crypto reserves to 2%.
Prudential exposure increased by 30% over the first half of the year, while custody declined by 66%, which was ascribed to banks withdrawing from the study and declining crypto asset market values.
Four other banks made up 35% of the monitored banks' total prudential exposure to crypto assets, while one unnamed bank was responsible for 61.7% of it.
According to the research, trading and clearing accounted for about 75% of all prudential exposure, with Bitcoin having the highest underlying exposure (over 40%), Coinbase coming in second (with just under 30%), and Ether coming in last (with less than 5%).
The BIS research, which sheds light on banks' exposure to bitcoin assets, demonstrates that, despite rising exposure levels, banks' overall holdings in cryptocurrency are still quite tiny.
The research states that on a weighted average basis across the sample of banks disclosing crypto asset exposures, prudential exposure, which refers to the potential losses a bank may face if the value of its crypto assets were to dramatically decline, accounts for just 0.013% of overall exposures.
Corresponding to this, the percentage of total exposures made up by crypto assets in custody is 0.005%.
The survey also finds that, with 11 of the 17 Group 1 banks reporting exposure, the bulk of banks having exposure to cryptocurrency assets are situated in the Western Hemisphere.
Two of the remaining four banks were overseas while the other two were in Europe.
With over 40% and under 30% of banks reporting crypto asset exposures, respectively, Bitcoin and Coinbase were the largest underlying exposures in terms of specific cryptocurrency assets.
Ether came in last place, receiving less than 5% of the exposure.
Although banks' exposure to cryptocurrency assets is still quite modest, it is important to note that the BIS has already established guidelines that limit banks' crypto reserves to 2% by the beginning of 2025.
As a result, it's possible that exposure levels may rise in the years to come as banks try to meet these requirements and buy bitcoin assets.
The paper, however, contends that any such growth would probably remain modest when compared to banks' overall holdings.