Today the Basel Committee on Banking Supervision published its latest monitoring report on banking risk exposures, including a section on crypto-assets that shows major regional differences. At the end of June 2022, the combined crypto exposures of 17 banks amounted to €2.9 billion, representing 30% growth and assets under custody €1 billion. Both figures show the tiny crypto penetration by banks.
While the custody figures appeared to decline from €3 billion at the end of 2021, €800 million is because two smaller European banks dropped out of the reporting and were specialist crypto banks.
Most banks have negligible exposures, with just five banks accounting for 97% of the €2.9 billion, and one of them makes up 62% of the figure. Eighty-five percent of the risk exposures are attributed to American banks.
Crypto regional differences
Eleven of the 17 banks are based in the Americas, with four in Europe and two elsewhere. When the figures are broken out by region, the two ‘rest of world’ banks showed the most growth in exposures from a very small base, followed by the Americas. Europe showed a sharp contraction, but this is likely because the two crypto banks are no longer included.
Assets under custody showed sharp drops across all regions.
The types of asset exposures also varied by region. The two banks considered ‘Rest of World’ are likely in Asia because the main assets were two tokenized financial instruments – tokenized bonds for Singtel Group and Sembcorp, both issued via Singapore’s UOB and ADDX. Europe showed exposures to Bitcoin, Ether and products linked to those two cryptocurrencies. American assets were linked products for Bitcoin, Coinbase and Ether.
The Basel Committee warned that comparison with 2021 may not be consistent and the figures could be underestimated.
In December 2022 the Committee finalized its rules for crypto-assets, which are expected to be implemented by January 1, 2025. Europe is working on legislation to ensure partial interim compliance, but the European Central Bank said it expects banks to comply now. Banks are pushing back that the rules put them at a disadvantage compared to startups.
