About the attitude of banks toward Bitcoin and other crypto, many people are acting rather shady. Do banks even want to invest in Bitcoin and other crypto? Don’t they see the crypto market as an enemy? A large survey of banks tells us a lot. We list which crypto besides Bitcoin the banks are buying. We also explain what these banks are doing with that crypto.
Banks, Bitcoin and crypto: here’s what it’s like
Banks’ accounting must meet certain guidelines. These are called Basel standards. To check whether the banks comply, there is an organization: the Basel Committee on Banking Supervision. They conducted research among 182 globally operating banks, including 8 Dutch banks. In a thick research report, the committee presented their findings. It also reveals how banks deal with crypto. A number of interesting conclusions can be drawn from this data. We will, of course, list these for you.
Bitcoin and crypto’s role is still limited at banks
First, we see that out of 182 reporting banks, only 19 banks indicate that they own crypto. Just over half of the banks (10 out of 19) with crypto ownership are from the Americas. 7 of the 19 banks are European. In the rest of the world, we see only 2 banks with crypto ownership. With that, the banking world’s interest in crypto doesn’t seem too big yet.
That picture is confirmed when we see that 2 of the 19% together own more than 50% of crypto at banks. Another 4 banks together own 40% of the crypto in circulation. Despite the report not mentioning specific banks, we assume based on media exposure that the two largest banks in crypto are the U.S. giants JP Morgan and Goldman Sachs. In the Netherlands, the banks don’t seem to be too hot yet. ABN AMRO, for example, has withdrawn its earlier crypto plans.
So much or so little banks invest in crypto
If we look at the financial interests of banks, we see that they own a total of about $9.4 billion in Bitcoin and other crypto. Although there are days when we do not have such an amount in the account, the banks’ interest is still very small at 0.14% of their total assets.
By the way, the study runs until the end of 2021, so the effects of this year’s bear crash are not yet visible.
Of course, it is interesting to know what crypto the banks are buying in addition to Bitcoin. The report gives a clear answer to that too. Of course, before you read the answer to this question, you can check all live Bitcoin and crypto prices for yourself on the site of Tradeincrypto.com 24 hours a day.
What crypto do banks own besides Bitcoin?
Since banks do extensive financial analysis and a lot of risk management, it is interesting to see what crypto they own.
Banks own Bitcoin (31%) and Ethereum (22%) the most. Other crypto coins such as Polkadot and Ripple are also prevalent, but they each make up only 2% of the banks’ crypto holdings. Cardano and Solana each account for 1%, and Litecoin and Stellar Lumen each have the smallest share of the bank’s crypto holdings at 0.4%.
Interestingly, banks invest a large share of their holdings (i.e., 35% of their assets) in derivatives based on Bitcoin and Ethereum. Derivatives are so-called derivatives such as options or futures, for example.
What are banks doing with their crypto holdings?
Now that we know how much crypto the banks have and what crypto they are buying one question naturally burns. What are they doing with their crypto holdings? The report answers that too. The banks offer roughly 5 crypto-related services. These are (from major to minor):
Custody and wallet services
Facilitation of trading opportunities for clients
Collateralization of financial transactions
Financial risk hedging
These last two services are particularly striking. Where many retail investors see investing in crypto as a risky investment, banks are apparently so convinced of crypto’s value and safety that they use it as security. You can, of course, study the entire Basel Committee report.
With banks slowly getting in, we expect that -certainly given the upcoming U.S. and European legislation- it will be a matter of time before banks will also enter the crypto market en masse.
Whether this offers opportunities in the market you will see when you start learning how to invest in crypto. You can do this, for example, with a free paper trading account at virtualinvestment.com.
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Note: We never give financial advice, so you can’t interpret our contributions that way either. Always do your own research and decide on rational grounds if, when, what and how much you want to invest.