As an analyst with extensive experience in the financial industry, I strongly support DTCC’s decision to assign zero collateral value to Bitcoin ETFs. The potential risks associated with leverage-based financialization games in the crypto market are significant and could potentially destabilize the entire financial system. DTCC’s move is a healthy one that aims to mitigate these risks and protect the stability of the financial system.
Caitlin Long, the CEO of Custodia Bank, has praised the DTCC’s upcoming change in assigning no collateral value to Bitcoin ETFs and other cryptocurrency-backed ETFs beginning April 30. As part of its annual credit facility renewal, DTCC will implement modifications to collateral valuations for specific securities.
Caitlin Long’s Statement On Zero Collateral Value Of Bitcoin ETFs
Beginning right away, DTCC’s choice involves a total loss (100% haircut) for securities linked to Bitcoin or cryptocurrencies. This action aims to minimize risk within the financial system. Long underlined the significance of this move in curbing potential financial manipulation through leverage games on Wall Street.
In a recent post on social media platform X, Long endorsed DTCC’s decision. She explained, “I have no issue with this choice as it minimizes the potential manipulative financial strategies of Wall Street that could lead to issues, and regulators might mistakenly blame Bitcoin for any resulting problems, even though Bitcoin would be uninvolved.”
As an analyst, I would rephrase it as follows: I concluded that DTCC’s decision is a positive move. Although this choice may influence collateral values for certain securities within its line-of-credit facility, it doesn’t affect the usage of crypto ETFs for lending purposes or as collateral in brokerage transactions. This announcement from DTCC arrives during a period of increasing institutional demand for crypto investment products, notably with the recent introduction of Spot Bitcoin ETFs.
In the first quarter after their debut, U.S. Bitcoin ETFs have accumulated more than $12.5 billion in managed assets, showcasing a notable change in investor attitude towards digital currencies. Nevertheless, recent trends indicate that Bitcoin ETFs are experiencing substantial withdrawals to the tune of $328 million in a single week.
Custodia Bank Vs Federal Reserve
As a researcher studying the ongoing legal dispute between Custodia Bank and the Federal Reserve, I can share that recently, Custodia Bank has chosen to file an appeal against a court ruling in Wyoming. This decision comes in response to the judge’s determination granting the Federal Reserve the power to prevent Custodia Bank from accessing a Master Account.
After the judge’s decision on March 29, 2024, Custodia Bank, under Long’s guidance, announced their intention to file an appeal. This action demonstrates their firm commitment to contesting the ruling and potentially exploring additional legal options in the ongoing dispute with the Federal Reserve. Should the appeal result in a favorable outcome for Custodia Bank, they would likely use it to strengthen their position in the lawsuit.
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2024-04-27 12:03