The Basel Committee tries to estimate the crypto exposure of banks: € 9.4 billion

The Basel Committee on Banking Supervision, an offshoot of the Bank for International Settlements, well in its advisory role as it integrated that cryptocurrencies were now part of the traditional financial landscape, has just published a study that attempts to assess institutions’ exposure. to this new asset class. According to the data collected, but partial, it would amount to 9.4 billion euros, or a minimum percentage (0.14%) of their total exposure.

€ 9.4 billion of exposure

We know that the Basel Committee has been concerned for several months about the banks’ foray into the cryptocurrency field. They has already made several recommendations in this area which were not necessarily well regarded by the institutional actors and which forced him to revise his copy a bit.

However, the topic remains hot, the European Central Bank has also recently put its two cents into it, calling for harmonization of regulations within the Union for banks involved in cryptocurrencies.

In fact, trying to investigate the subject, the Committee produced a report entitled “Bank Exposure to Cryptocurrencies: A New Data Set”. One of the first exercises of this kind, but the authorities take the precaution of specifying it out of a total of 182 banks included in the analysis, only 19 submitted data. And of the number, the majority were American, which is not surprising if you know their degree of involvement … Anyway, on this basis, here is what is reported.

Total exposures to cryptocurrencies reported by banks amount to approximately € 9.4 billion. In relative terms, these exposures represent only 0.14% of total weighted average exposures across the entire sample of banks reporting exposures to cryptocurrencies.

Renzo Corrias, member of the Secretariat of the Basel Committee for Banking Supervision, in Report

Important clarification: extended to all banks, exposure to cryptocurrencies represents only 0.01%, far from the ceiling set at 1% excluding stablecoins that the Committee itself defined to avoid overexposure and the possible risk of failure.

Nature of banks’ exposure to cryptocurrencies

Other information from the study, the nature of the activities linking banking institutions to cryptocurrencies. Renzo Corrias notes the following: cryptographic holdings and loans, clearing and market making services and, most importantly, custody services.

As for the cryptocurrencies in question, without too many surprises, Bitcoin and Ether are the first. Directly exposed respectively at 31 and 22%, or through instruments of which they are the underlying (25% and 10%). They alone account for 90% of the exposure, relegating other cryptocurrencies to a negligible proportion. However, the report notes the presence of Polkadot (DOT), Ripple (XRP) at 2%, Cardano (Ada) and Solana (SOL) at 1%, and Litecoin (LTC) and Stellar (XLM) at 0.4%.

Nonetheless, we will be careful not to take all these indications literally, recommending the Committee itself to consider this first study with caution in the absence of any methodology and verification of the claims based solely on the goodwill of the participants.

As the cryptocurrency market evolves rapidly, it is difficult to determine whether some banks have underestimated or overstated their exposures to cryptocurrencies and to what extent they have consistently applied the same approach to rank all exposures.

Renzo Corrias, member of the Secretariat of the Basel Committee for Banking Supervision, in Report

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