DTCC Says ETFs with Bitcoin Exposure Will Have Zero Collateral Value for Loans
Financial services giant DTCC has made it clear that it will allocate zero collateral to exchange-traded funds (ETFs) with exposure to Bitcoin or cryptocurrencies and will not grant any loans against them.
Will DTCC Deal a Major Blow to Bitcoin ETFs?
Beginning April 30, 2024, the Depository Trust & Clearing Corporation (DTCC) will make changes to the collateral values of certain securities as part of its annual credit line renewal. These changes may affect position values within the Margin Monitor.
DTCC announced that, effective immediately, no collateral value will be assigned to Exchange Traded Funds (ETFs) or similar investment vehicles containing Bitcoin or other cryptocurrencies as underlying assets. As a result, these securities will face a 100% cut.
However, popular cryptocurrency enthusiast KO Kryptowaluty clarified that this will only apply to inter-organization settlement in the Line of Credit (LOC) system.
A Line of Credit serves as a financial instrument that allows market participants to access borrowed funds for short-term transaction financing or to meet liquidity requirements. The use of cryptocurrency Exchange Traded Funds (ETFs) for lending purposes and as collateral in brokerage activities remains unaffected and subject to the risk tolerance of individual brokers.
The launch of spot Bitcoin ETFs has led to increased institutional interest in the investment product. Within three months of launch, all US Bitcoin ETFs collectively reached more than $12.5 billion in assets under management (AUM).
BTC ETF Inflows Slow Down
After a strong start to the launch of Bitcoin ETFs, overall inflows have followed a slowing trend in recent weeks. Over the last three days, these spot Bitcoin ETFs have witnessed strong outflows reported by several ETF issuers.
According to the latest data reported on April 26, the total net outflow of Bitcoin spot ETFs stood at $83.6147 million. Grayscale’s ETF GBTC experienced a significant single-day outflow of $82.4197 million. According to data from Farside investors, GBTC’s historical net outflow currently stands at a significant $17.185 billion.
While DTCC has taken a stance against crypto ETFs, the same is not true for other traditional players. 100-year-old bank BNY Melon recently announced that it wants to invest in Bitcoin ETFs. The recent filing of BNY Mellon’s Form 13F with the Securities and Exchange Commission has garnered significant attention in the global crypto community.
The bank’s investments in BlackRock and Grayscale Bitcoin ETFs not only represent local events but also serve as a global indicator of the growing acceptance and integration of cryptocurrencies within the traditional financial sector.
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Bhushan is a FinTech enthusiast and has a good ability to understand financial markets. His interest in economics and finance draws his attention to the emerging Blockchain Technology and Cryptocurrency markets. He is in a constant learning process and motivates himself by sharing the knowledge he has acquired. In her spare time, she reads thriller novels and sometimes explores her culinary skills.
The content presented may contain the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. Neither the author nor the publication accepts any liability for your personal financial loss.
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