Banks hold $9,200,000,000 in Bitcoin, Ethereum, Solana and other cryptos – Will they increase their share?

• The total exposure of top global banks to crypto assets is more than $9.2 billion and of this, Bitcoin and Ethereum have a combined share of more than 50 percent.
• Banks’ exposure to crypto assets has been spread across three broad categories of crypto holding, custodial services, and crypto wallets and insurances.

The Basel Committee on Banking Supervision (BCBS) recently published a report highlighting the exposure to crypto assets of global banks. The Basel Committee has collected some granular information on the bank’s holdings of crypto assets.

In total, 19 banks from America, Europe, and other parts of the world submitted the data. As per the report, the total exposure to crypto assets by banks amounts to a total of $9.2 billion or €9.4 billion. In relative terms, this exposure makes up only 0.14 percent of the total exposure on an average cost basis. If we consider the entire sample of banks included in the Basel III monitoring exercise, the exposure shrinks to only 0.01 percent of the total exposure. The report from BIS shares the division for the exposure to each of the cryptocurrencies. It notes:

Reported cryptoasset exposures are primarily composed of Bitcoin (31%), Ether (22%) and a multitude of instruments with either Bitcoin or Ether as the underlying cryptoassets (25% and 10% respectively). Together, these make up almost 90% of reported exposures.

Focusing on the top 20 reported cryptoassets by exposure amount, other relatively significant reported cryptoassets include Polkadot (2% of reported exposures), Ripple XRP (2%), Cardano Ada (1%), Solana (1%), Litecoin (0.4%) and Stellar (0.4%).

The authors of the BIS report stated that the data provided is the most up-to-date data available to them. “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 notes.

Bank’s crypto exposure distribution across activities

The distribution of the banks’ crypto exposure has been across multiple activities. This means these banks have direct as well as indirect exposure to crypto assets. This crypto exposure has been grouped into three broad categories.

1. Crypto Holdings and Lendings: This represents the outright holdings and investments in digital assets or products with underlying crypto assets. It could also include lending to corporates, households, and financial institutions with exposure to digital assets.
2. Clearing, Client, and Market-Making Services: This includes activities of trading or clearing crypto assets derivatives and futures. It also involves undertaking securities financing transactions (SFTs) involving digital assets, underwriting ICOs, as well as issuing securities with underlying crypto assets.
3. Custody, Wallet, Insurance, and Other Services: This includes providing either custodial, wallet, or insurance services for digital assets. It also includes facilitating client activity for products with underlying crypto assets.

As we can see the overall exposure to crypto assets is still negligible. However, traditional institutions are slowly making a move in the crypto space. Thus, there’s every chance that bank’s exposure to crypto assets could grow with time.