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Global banks only have a 0.01% exposure to crypto, according to the BIS

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(Kitco News) - According to the latest Basel III Monitoring report, banks are in no hurry to adopt cryptocurrency and blockchain technologies. 

The new report, which was commissioned by the Bank for International Settlements (BIS), shows that the 19 largest financial institutions reportedly hold €9.4 billion ($9.18 billion) worth of crypto, which equates to 0.14% of “total exposure on a weighted average basis across the sample of banks reporting cryptoasset exposures.”

“When considering the whole sample of banks included in the Basel III monitoring exercise (ie also those that do not report cryptoasset exposures), the amount shrinks to 0.01% of total exposures,” the report said. 

This means that in total, the global bank exposure to crypto is only 0.01%, a clear sign that banks are not the driving force behind cryptocurrency adoption. 

The data provided came from 16 Group 1 banks and three Group 2 banks – ten of which are located in the Americas, while seven are in Europe and the other two are located in other parts of the world. According to the report, “Group 1 banks are those that have Tier 1 capital of more than €3 billion and are internationally active. All other banks are considered Group 2 banks.”

The authors of the report noted that while the figures provided are based on the most up-to-date data available to the BIS, the exponential growth rate of crypto makes it difficult to estimate the real exposure rate. 

“As the cryptoasset market is fast evolving, it is difficult to ascertain whether some banks have under- or over-reported their exposures to cryptoassets, and the extent to which they have consistently applied the same approach to classifying any exposures,” the report said. 

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Digging into the data

A deeper dive into the data provided shows that two institutions control more than half of the total cryptoasset exposures, four banks hold around 40% of that value, and the remaining 10% is split between 13 banks.

Breaking it down by asset, Bitcoin (BTC) comprised 31% of the total exposure while Ether (ETH) constitutes 22% of all cryptoassets held by the banking institutions surveyed. Products or “instruments” that utilize either Bitcoin or Ether as the underlying cryptoasset comprised 25% and 10%, respectively. “Together, these make up almost 90% of reported exposures,” the report said. 

Other notable holdings include Polkadot (2% of reported exposures), XRP (2%), Cardano's ADA (1%), Solana (1%), Litecoin (0.4%) and Stellar (0.4%). Additional tokens that were also reported in smaller amounts include the stablecoin USD Coin (USDC) and several unidentified tokenized assets. 

The three main categories of activities and crypto-related functions that the above allocations expose the banks to include crypto holdings and lendings (4.2%); clearing, client and market-making services (45.7%); and custody/wallet/insurance and other services (50.2%).

The Custody/wallet/insurance and other category includes all custody, wallet, and insurance services for cryptoassets and facilitating client activity such as self-directed or manager-directed trading. 

All trading activities on client accounts, clearing crypto derivatives and futures, ICOs, and issuing securities with underlying crypto assets fall under the “clearing, client and market-making services” category. 

Holding and investing in cryptoassets, lending to entities, and issuing cryptoassets backed by assets on the bank’s balance sheet are included in the crypto holdings and lending category.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.