Key Points
- DTCC announces it won’t assign collateral to ETFs with exposure to Bitcoin or other cryptocurrencies.
- Despite DTCC’s stance, traditional financial institutions like Goldman Sachs are showing renewed interest in crypto markets.
The Depository Trust and Clearing Corporation (DTCC) has recently revealed that it will not assign any collateral to exchange-traded funds (ETFs) that have exposure to cryptocurrencies such as Bitcoin.
The changes, which will come into effect on April 30, 2024, could potentially impact the collateral values of certain securities during the annual line-of-credit facility renewal.
DTCC’s Stance on Crypto ETFs
This means that ETFs and similar investment instruments with Bitcoin or other cryptocurrencies as underlying assets won’t be assigned any collateral value, leading to a 100% reduction in their collateral value.
However, it’s important to note that this will only apply to inter-entity settlement within the Line of Credit (LOC) system.
A Line of Credit is a borrowing arrangement that allows the borrower to draw funds up to a predetermined credit limit. According to crypto enthusiast K.O. Kryptowaluty, the use of cryptocurrency ETFs for lending and as collateral in brokerage activities will continue, depending on individual brokers’ risk tolerance.
Traditional Financial Institutions and Crypto
While DTCC has taken a stand against crypto ETFs, the same cannot be said for other traditional players. Goldman Sachs’ clients, for example, have begun reentering the crypto market this year, driven by renewed interest following the approval of spot Bitcoin (BTC) exchange-traded funds.
The introduction of spot Bitcoin ETFs has spurred increasing institutional interest. Within three months of their launch, all United States Bitcoin ETFs have accumulated over $12.5 billion in assets under management (AUM).
In February, an estimated 75% of new Bitcoin investments came from the 10 spot Bitcoin exchange-traded funds approved in the United States on Jan. 11.
However, despite a healthy launch of Bitcoin ETFs, overall inflows have recently slowed down. In the past three days, multiple ETF issuers reported significant outflows in these spot Bitcoin ETFs.
Grayscale’s GBTC ETF saw a notable single-day outflow of $82.4197 million. The current historical net outflow for GBTC totals a substantial $17.185 billion.