DTCC Bars Bitcoin-linked ETFs as Collateral
With the issuance of this notification, exchange-traded funds and other such financial vehicles that have Bitcoin or other cryptocurrencies as their underlying assets will not be given any collateral value.
The financial services provider for the financial markets, the Depository Trust and Clearing Corporation (DTCC), announced that it will not lend money against or assign any collateral to exchange-traded funds (ETFs) that have exposure to Bitcoin or other cryptocurrencies.
DTCC’s announcement states that effective April 30, 2024, the DTCC will implement changes to collateral values for specific securities during its annual line-of-credit facility renewal, potentially affecting position values in the collateral monitor.
According to this notice, which was published on April 26, financial instruments such as exchange-traded funds (ETFs) that use Bitcoin or other cryptocurrencies as their underlying assets will not have any collateral value allocated to them; consequently, their collateral value would be reduced by 100%.
K.O. Kryptowaluty, a cryptocurrency enthusiast, explained on X that this would only apply to inter-entity settlement inside the line of credit system as a clarification.K.O. Kryptowaluty, a cryptocurrency enthusiast, explained on X that this would only apply to inter-entity settlement inside the line of credit system as a clarification.
A line of credit is a type of loan that a financial institution extends to a person or organization, enabling the borrower to take out loans up to a pre-established credit limit. These funds are available for use whenever needed, and interest is normally only charged on the amount borrowed.
According to Kryptowaluty, depending on the risk tolerance of individual brokers, utilizing cryptocurrency ETFs as collateral for loans and as a means of lending will remain unaffected.
Although DTCC is opposed to cryptocurrency exchange-traded funds (ETFs), other traditional players may not share this stance. In 2024, Goldman Sachs' clientele started to reenter the cryptocurrency space due to a resurgence of interest following the introduction of spot Bitcoin ETFs.
Growing institutional interest in this investment product has been sparked by the US government's launch of spot Bitcoin ETFs. All U.S.-based Bitcoin ETFs have amassed approximately $12.5 billion in assets under management in the three months since their introduction.
Roughly 75% of fresh Bitcoin investments in February originated from the 10 spot Bitcoin ETFs that were authorized on January 11 in the United States.
But lately, net inflows into the ETFs have decreased. Significant outflows have been recorded lately by several ETF issuers. Spot Bitcoin ETFs in the United States experienced a net outflow of $218 million on April 25, up from a $120 million outflow the day before, according to Farside Investors.
Grayscale's GBTC ETF experienced a noteworthy $82.4197 million outflow in a single day. Farside data indicates that GBTC has generated net outflows of a significant $17.185 billion overall.
