Basel Committee Reports Significant Growth In U.S. Banks' Crypto Exposure

Overview of Basel III Monitoring Statistics: December 2023

According to Odaily, the Basel Committee on Banking Supervision has recently published its monitoring statistics for December 2023. Among the key data is the emerging trend of crypto asset exposure in the banking sector, which reflects significant shifts in how banks are adapting to the evolving financial landscape.

Impact of Bitcoin ETF on Crypto Services

While this particular data predates the highly anticipated launch of a Bitcoin Exchange-Traded Fund (ETF) in the United States, it provides valuable insights into the increasing willingness of U.S. banks to offer crypto services to their clients. Despite this trend, American banks have largely retreated from the cryptocurrency custody sector.

Regulatory Challenges and the Role of the SEC

The primary driver behind the exit of U.S. banks from the crypto custody market seems to be the U.S. Securities and Exchange Commission’s (SEC) SAB 121 accounting rule, which explicitly prohibits banks from offering custody services for cryptocurrencies. However, with the potential for a policy shift under the incoming Trump administration, the complete abandonment of this regulation may pave the way for renewed engagement in this sector.

Custody Assets Growth in Europe

In contrast to the American landscape, the second half of 2023 witnessed a remarkable growth in assets under custody in Europe, surging by 49% compared to the first half. The total reached an impressive 5.5 billion euros (approximately 5.8 billion dollars). Notably, this surge primarily involves spot cryptocurrencies, which account for 94% of global custody assets.

Client Exposure in the Americas

The statistics indicate that the Americas maintain a dominant position in terms of client exposure, providing an astonishing 98% of all services. In concrete terms, U.S. banks have reported exposure to clients amounting to 190 billion euros (about 201 billion dollars). This reflects a significant expansion in their services and engagement with the crypto market.

U.S. Banks Increase Exposure

In addition to client exposure, U.S. banks themselves have markedly increased their own exposure to crypto assets. This change is particularly striking, as they have nearly quadrupled their exposure levels, albeit from a relatively small starting point. By the end of 2023, the prudential risk exposure in the U.S. banking sector stood at a total of 531 million euros.

Conclusion

The Basel III monitoring statistics illustrate a complex and evolving relationship between the banking sector and cryptocurrency assets. As European banks see substantial growth in custody services and U.S. banks explore increasing crypto exposure, the landscape will likely continue to shift as regulations evolve and opportunities expand.

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