Today the Basel Committee on Banking Supervision (BCBS) released its latest statistics, including details about banking crypto asset activities. The most notable aspects are new details indicating very different activity patterns across regions. While prudential exposures by banks continues to expand, overall activities for the half year to June 2025 was down, partly reflecting the declines in the crypto markets during the February to May period. However, there are major caveats around the figures. The banks reporting from one period to the next is inconsistent. For the six months to June 2025, the number of European reporting banks dropped from 13 to eight, which might explain an apparent dramatic drop in European custody and client trading.
One of the notable details was around hedging. The vast majority of bank exposure is to bitcoin and ether. Under the Basel rules, banks can qualify for more favourable treatment (Group 2a) if hedging instruments are available, specifically either traded and centrally cleared derivatives or an ETF or ETN that solely references the cryptoasset. The statistics showed that for bitcoin and ether most banks opt for hedgeable strategies (Group 2a) rather than those that cannot be hedged (Group 2b). By contrast, Solana and XRP lack the cleared derivatives or qualifying ETPs needed to meet the hedging recognition criteria, so the majority of exposure to those assets was Group 2b at that time. This demonstrates that for banks to adopt a particular crypto, the hedging infrastructure needs to be in place so they can minimize prudential exposures.
A more curious aspect of the report is substantial shifts in the types of prudential exposure. At the end of 2024 almost two thirds of exposure in the Americas was to derivatives. Just six months later the proportion had dropped to 38%, with the ‘other’ category jumping to 35%. The most likely component of ‘other’ is crypto lending and securities financing transactions, meaning taking crypto as collateral for lending or repo transactions involving crypto. There were certainly reports about this activity around that time.
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