A new study produced by a global group intended to establish financial regulatory standards sheds light on banks’ vulnerability to crypto assets.
As part of its analytical, supervisory, and regulatory endeavours concerning the emerging asset class, the Basel Committee on Banking Supervision wants to examine banks’ exposure to cryptocurrency.
The study concluded that the average crypto-asset exposure of banks is roughly $9.24 billion, based on data given by 19 institutions (10 from the Americas, 7 from Europe, and 2 from abroad).
However, the research also points out that the exposure is not uniformly diversified, with only two banks accounting for more than half of the crypto exposure and four accounting for less than 40%.
The analysis also revealed the kind of digital assets to which financial institutions are most vulnerable. On this ranking, Bitcoin (BTC) is number one, followed by Ethereum (ETH).
Bitcoin accounts for 31% of reported crypto-asset exposures, followed by Ether at 22%, and a wide variety of products that include Bitcoin or Ether as their underlying crypto asset at 25% and 10%, respectively. When added together, they account for over 90% of all recorded exposures.
According to the data, financial institutions have substantial holdings in tokenized assets such as Polkadot (DOT), Ripple (XRP), Cardano (ADA), Solana (SOL), Litecoin (LTC), and Stellar (XLM), and a lesser holding of stablecoin USD Coin (USDC).
There are three main ways in which banks are exposed to the cryptocurrency market: via their own holdings and loans, through their clearing and market-making services, and through their custody/wallet/insurance offerings.
Half of the stated crypto exposures come from custody/wallet/insurance and other services, with the remaining 46% coming mostly from clearing and market-making services and the last 4% coming from crypto holdings and loans.
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