Crypto Banking Assets Plunge 66% this Year, BIS Report Reveals



A new analysis from the Bank For International Settlements (BIS) indicates that crypto assets under custody of banks around the world have dropped to EUR 1.0B (US$1.06B) in 2022, a sharp decline of 66% from EUR 3.0B in 2021.

The steep descent in crypto banking coincided with a market crash prompted by multiple debacles including the collapse of the Terra Blockchain (LUNC-USD) (UST-USD) in May, as well as the failure of crypto exchange FTX’s (FTT-USD) later in the year. Bitcoin (BTC-USD), the biggest token by market capital, experienced its worst Y/Y plunge since 2018, losing 65% of its value.

In addition, the Basel Committee On Banking Supervision, the global banking regulator, approved a new regulation in late 2020 where a bank’s exposure to a certain crypto must not exceed 2%. The BIS believes that this measure also contributed to the decrease in depository institution’s crypto custody.

When analyzing the data collected from participating banks, as well as those that didn’t submit crypto custody exposures (but opted into the wider scheme), the total exposure was estimated at 0.001%. This is a clear indication that banks have a minimal involvement with cryptocurrencies, with regulators expressing concerns over the financial stability of the sector and the risk of money laundering.

Cryptocurrency banking is on the decline according to a recent study conducted by the Bank for International Settlements (BIS). The BIS study found that the total prudential cryptocurrency exposures for banks were down by 66% in 2022, compared to the year prior. Despite this decrease, the underlying cryptoasset activity still increased by 30% in the same time frame.

The majority of the reported crypto exposures were in Bitcoin, accounting for 43%, followed by Coinbase stock at 29% and Ethereum at 4%. To further add to the strain on the industry, the prices of Bitcoin have taken a significant hit in recent days, with a 4.7% drop to $22.36K as of Friday.

In response to the market turmoil, Signature Bank has taken action to limit its digital currency deposit exposure to under 20% of total deposits. Other banks, such as Goldman Sachs, SVB Financial, Customers Bancorp, Metropolitan Bank, Bank of New York Mellon, and BNP Paribas, have made moves towards decentralized finance (DeFi).

Earlier this month, two of the strongest advocates for cryptocurrencies among congress were also pushing back against the SEC’s crypto accounting policy.

Related articles

Recent articles