The Crypto Winter’s Consequence: Banks Are Moving Away From Bitcoin

A professional investigation revealed that banks’ exposure to crypto had a significant decline in 2022. The Basel Committee on Banking Supervision (BCBS), an entity reliant on the Bank for International Settlements (BIS), carried out the study. One of the most significant instances, according to the study, is connected to the sample of participating companies. 126 banks out of the 182 that had previously participated in the sample did so this time.

The Comparison Between the Periods Show how the Bitcoin Exposure Fell

As compared to statistics from the end of 2021, cryptocurrencies in custody fell by EUR 2 billion (-66%). The reported decline in cryptocurrency holdings is attributed to a reduction in the sample of participating banks to the extent of 40%, with the remaining 60% attributable to the general decline in the market capitalization of crypto assets since the end of 2021 and decreased positions of banks relative to the prior period.

The Crypto Winters Consequence Banks Are Moving Away From Bitcoin

The crypto winter and the FTX crash are factors contributing to this drop. According to the document’s reduction in detail, banks’ exposure to cryptocurrencies decreased from 61.7% in 2021 to 15.4% in 2022. Between June 10, 2021, and June 30, 2022, data were gathered.

There is a Disparity Between Banks Regarding the Bitcoin Exposure

The disparity in asset amounts amongst banks is another intriguing aspect of the study. The distribution of Bitcoin exposures across the reporting banks is unequal. More than half (62%) of the cryptocurrency exposures are made by one bank, while slightly under 35% are made by four other institutions.

In contrast to spot exposures, products connected to Bitcoin and Ethereum account for the vast majority (99%) of underlying exposures to these two cryptocurrencies. Banks have disclosed a wide range of operations that led to prudential exposures to crypto assets.

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David Moore

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