Banks are cutting exposure to crypto, BIS report claims
Banks worldwide have reduced their exposure to cryptocurrencies by as much as 46.3% by 2022, according to a new report from the Bank for International Settlements (BIS).
Banks’ total exposure to crypto assets fell from 61.7% in 2021 to 15.4% in 2022.
This was due to the weakening of cryptocurrencies throughout 2022, following market contraction following the collapse of the Terra/Luna algorithmic stablecoin in May and the fall of the FTX exchange in November.
Another possible factor mentioned was that in December 2022, new regulations were approved by the Basel Committee on Banking Supervision, which state that a bank’s exposure to certain cryptocurrencies must be limited to no more than 2%. The report considers this to be another reason for the decline, as the banks possibly reduce their exposure due to the new rules.
Read more: Crypto live prices
The report concluded that the drop in exposure was also due to a drop in the number of banks that participated in the BIS survey, the selection of banks involved decreased from 182 banks in 2021 to 126 in 2022.
The Basel Committee on Banking Supervision’s Basel III Monitoring Report stated: “As of the end of June 2022, 17 Group 1 banks reported exposures or crypto assets under custody, 11 from the Americas, 4 from Europe and 2 from the rest of the world.”
“The total precautionary exposures to crypto-assets and crypto-assets under custody reported by banks amount to approximately €2.9 billion and €1.0 billion, respectively.”
Read more: Crypto: How to get funding for your technology start-up
Relative to other asset classes, bank exposure to cryptocurrency remains marginal, with the report adding that “prudential exposures account for just 0.013% of total exposures on a weighted average basis across the sample of banks reporting exposures to cryptoassets, while cryptoasset exposures in custody account for just 0.005 % of total exposures’.
Read more: Bitcoin price drops with $80 million wiped out in 24 hours
The report released on Tuesday then detailed the composition of crypto assets that the banks have exposure to, stating that these are primarily bitcoin (BTC-USD), 43%, Coinbase (COIN) shares, 29% and ethereum (ETH-USD), 4%.
Watch: Fireblocks director and former Bank of England head of fintech talks CBDCs and stablecoins
Download the Yahoo Finance app, available for apple and Android.
