Market Dynamics Influenced by DTCC’s Announcement of Crypto ETF Collateral Exclusion


Position values in the collateral monitor may be affected by changes that DTCC makes to the collateral values of certain securities as part of its yearly line-of-credit facility renewal, which takes effect on April 30, 2024.

A key player in financial services offering clearing and settlement services, the Depository Trust and Clearing Corporation (DTCC), has announced that it will not lend money against Bitcoin or other cryptocurrency exchange-traded funds (ETFs) and will not assign collateral to such funds.

As part of its yearly line-of-credit facility renewal, DTCC will make changes to the collateral values of certain securities as of April 30, 2024. These changes may affect the position values in the collateral monitor.

Based on the statement issued on April 26, ETFs and similar investment products that are backed by Bitcoin or other cryptocurrencies will no longer have any collateral value. This means that their collateral value will be reduced by 100%.

K.O. Kryptowaluty, an avid crypto user, clarified in a post that this ruling would only influence lines of credit settlements between entities.

In a line of credit, a bank or other lending institution agrees to lend money to a person or business up to a certain limit, and the borrower pays interest only on the amount they borrow.

As long as brokers have a certain level of risk tolerance, Kryptowaluty claims that using cryptocurrency ETFs as collateral in brokerage operations and for loans would continue unabated.

Even while DTCC is against crypto ETFs, not all conventional players feel the same way. In 2024, customers of Goldman Sachs have made a triumphant return to the cryptocurrency market, driven by a renewed sense of curiosity after the adoption of spot Bitcoin ETFs.

Institutional investors’ enthusiasm for Bitcoin ETFs has skyrocketed since their introduction to the US market.

The total assets under management for all U.S.-based Bitcoin ETFs has surpassed $12.5 billion in less than three months since their launch.

Roughly three-quarters of the new Bitcoin investments in February came from the ten spot Bitcoin ETFs approved in the United States on January 11th.

However, recent net inflows into the ETFs have slowed. There have been large withdrawals from many ETFs recently.

Farside Investors reports that on April 25, spot Bitcoin ETFs in the US had a net outflow of $218 million, after a $120 million outflow the day before.

A significant outflow of $82.4197 million was recorded by Grayscale’s GBTC ETF in a single day. According to Farside’s data, GBTC has seen a substantial net withdrawal of up to $17.185 billion.

Also Read: Russian politician claims country is not planning outright crypto ban

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