DTCC Says ETFs With Bitcoin Exposure Will Have Zero Collateral Value for Loans

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As a researcher with extensive experience in the financial services industry, I believe that DTCC’s decision to assign zero collateral value to Bitcoin and cryptocurrency ETFs is a significant development. This move could potentially impact the demand for these investment products and their integration into traditional financial systems.

The DTCC, a major player in the financial services sector, has unequivocally stated that it will not grant any collateral for exchange-traded funds (ETFs) linked to Bitcoin or cryptocurrencies, and will also refuse to offer loans secured by these assets.

DTCC Giving A Big Blow to Bitcoin ETFs?

Effective April 30, 2024, the Depository Trust & Clearing Corporation (DTCC) will implement changes to collateral requirements for certain securities in relation to its yearly line-of-credit facility update. These adjustments may influence the values displayed in the Collateral Monitor.

Starting today, Exchange-Traded Funds (ETFs) and comparable investment vehicles that use Bitcoin or other cryptocurrencies as their base assets will no longer have collateral values assigned to them by DTCC. This means that these securities will undergo a 100% haircut in value.

As a researcher studying the intricacies of the Line of Credit (LOC) system and its application to cryptocurrencies, I have come across an interesting perspective shared by K.O. Kryptowaluty. He mentioned that this particular concept might be relevant when entities are settling transactions with each other within the LOC system. However, it’s essential to note that this would not encompass all instances of cryptocurrency transactions occurring outside the LOC framework.

A Line of Credit functions as a financial instrument, providing market players with the ability to securely borrow funds for short-term business transactions or to manage their liquidity needs. The application of cryptocurrency Exchange-Traded Funds (ETFs) in lending arrangements and as collateral in brokerage deals continues unaltered, contingent upon the risk thresholds established by each individual broker.

As a researcher, I’d describe it this way: The Depository Trust Company (DTC), which is a significant element of the US financial framework, functions as the central securities depository. It’s an integral part of the larger organization known as the Depository Trust & Clearing Corporation (DTCC).

what you write…

— K.O Kryptowaluty (@KO_Kryptowaluty) April 27, 2024

As an analyst, I’ve observed a significant surge in institutional demand for Bitcoin investing following the introduction of spot Bitcoin Exchange-Traded Funds (ETFs) in the United States. Within merely three months of their launch, these Bitcoin ETFs have collectively amassed over $12.5 billion in assets under management (AUM).

BTC ETF Inflows Are Decelerating

The initial surge in investment into Bitcoin ETFs has slowed down significantly in the past few weeks. In fact, these Bitcoin ETFs have experienced notable outflows over the last three days as reported by various ETF providers.

On April 26th, the latest data revealed that Bitcoin spot ETFs experienced a total net withdrawal of approximately $83.61 million. Among them, Grayscale’s GBTC had a massive one-day outflow of around $82.42 million. According to Farside investors’ data, the historical net outflow for GBTC is currently significant, amounting to over $17.19 billion.

As a researcher, I’ve noticed an intriguing contrast in the stances taken by different traditional financial players regarding crypto Exchange-Traded Funds (ETFs). While the Depository Trust & Clearing Corporation (DTCC) has expressed reservations, centenarian financial institution BNY Mellon is actively pursuing exposure to Bitcoin ETFs. Their recent submission of Form 13F to the Securities and Exchange Commission has sparked great interest within the global crypto community.

The bank’s decisions to invest in BlackRock and Grayscale Bitcoin ETFs indicate both local developments and represent a significant global trend, demonstrating increasing acceptance and incorporation of cryptocurrencies into the conventional financial system.

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2024-04-27 07:38