The Depository Trust and Clearing Corporation (DTCC) has announced a pivotal change in its financial protocols, stating that starting April 30, 2024, it will not assign any collateral value to exchange-traded funds (ETFs) that hold Bitcoin or other cryptocurrencies as underlying assets. This adjustment is part of the annual review and update of the DTCC’s line-of-credit facility, affecting the securities’ standing in collateral assessments.
Clarifying the Scope and Impact
The policy shift means that these cryptocurrency-linked ETFs will experience a complete elimination of collateral value, directly impacting their utility in secured financial activities within the DTCC system. However, K.O. Kryptowaluty, a noted cryptocurrency enthusiast, explained in a post on the social media platform X that the new rule applies strictly to inter-entity settlements within DTCC’s line of credit system. He emphasized that the ability to use these ETFs as collateral or for borrowing in brokerage operations might still continue, subject to the discretion and risk assessment of individual brokers.
Read More: Franklin Templeton Debuts Ethereum ETF, Awaiting SEC Approval
Broader Market Implications
Despite DTCC’s cautious stance, the broader financial industry displays mixed reactions to cryptocurrency investments. For instance, Goldman Sachs has reported a resurgence of client interest in the crypto market in 2024, sparked by the U.S. approval of spot Bitcoin ETFs. These spot ETFs have quickly garnered significant attention, amassing over $12.5 billion in assets under management within just three months of their launch.
However, the recent trend shows a slowdown in the inflow to these ETFs, with notable outflows recorded in April. For example, Farside Investors highlighted that spot Bitcoin ETFs in the U.S. experienced a net outflow of $218 million on April 25, preceded by a $120 million outflow the day before. Grayscale’s GBTC ETF alone saw an outflow of $82.4197 million in a single day, contributing to a total net outflow of $17.185 billion.
