DTCC stops supporting crypto ETF loans and withdrawing collateral.
Depository Trust and Clearing Corporation (DTCC), a financial services company, has declared that it will no longer provide loans or assign any collateral to exchange-traded funds (ETFs) that have exposure to Bitcoin or other cryptocurrencies.
The DTCC will modify the collateral values for particular securities as of April 30 as part of its yearly line-of-credit facility renewal, which may have an effect on the securities’ position values in the collateral monitor.
The announcement from April 26 said that the collateral value of exchange-traded funds (ETFs) and other investment vehicles that use Bitcoin or other cryptocurrencies as their underlying assets would be zeroed out.
In a post on X, cryptocurrency enthusiast K.O. Kryptowaluty pointed out that the modification only applies to inter-entity settlements made within the line of credit system.
A line of credit is a type of lending arrangement in which a financial institution extends credit to a person or business, allowing the latter to make withdrawals up to a prearranged credit limit.
The borrower often simply pays interest on the amount borrowed and is free to spend the cash as needed.
Depending on the risk tolerance of individual brokers, Kryptowaluty predicts that the usage of cryptocurrency ETFs for lending and as collateral in brokerage activities will probably continue undisturbed.
Although the DTCC has stated that it is against bitcoin exchange-traded funds (ETFs), other major players have not. In 2024, Goldman Sachs clients have started to re-enter the cryptocurrency market, propelled by newfound fervor with the introduction of spot Bitcoin ETFs.
Within three months of their launch, these ETFs had over $12.5 billion in assets under administration, demonstrating the strong institutional interest in them.
An estimated 75% of new Bitcoin investments in February came from the ten Bitcoin ETFs that were approved in the United States on January 11.
Inflows have decreased in recent weeks, notwithstanding this spike. On April 25, Farside Investors revealed a net withdrawal of $218 million from spot Bitcoin ETFs, which came after a $120 million withdrawal the day before.
The U.S. Securities and Exchange Commission (SEC) once again postponed making a decision regarding applications for Bitcoin ETF options on April 25. The regulatory agency is requesting public comments within the next 21 days and rebuttals within 35 days, in addition to extending the deadline.
The agency has questioned whether options on spot Bitcoin ETFs should follow the same rules as stocks.
Several exchanges, including Cboe Exchange, Inc., BOX Exchange LLC, MIAX International Securities Exchange LLC, Nasdaq ISE, LLC, and NYSE American LLC, have applied to offer options trading on these ETFs.
In addition, the SEC has deferred decisions on Grayscale and Bitwise’s applications to introduce Bitcoin options ETFs, setting the next review date for May 29.
