The Depository Trust and Clearing Corporation (DTCC), a central pilot in financial market clearing and settlement services, announced a new policy that directly affects exchange-traded funds (ETFs) with exposure to Bitcoin and other cryptocurrencies. Effective April 30, 2024, DTCC will no longer consider these assets as eligible for collateral under its line of credit system.
This move, initially released on April 26, highlights the DTCC's decision to implement a 100% reduction in the collateral value for such financial instruments. ETFs that hold Bitcoin or other cryptocurrencies as underlying assets will therefore face significant restrictions on their ability to be used as collateral in traditional financial transactions.
However, according to KO Kryptowaluty, a cryptocurrency enthusiast, the new DTCC measures will only be applicable for settlement between entities operating directly under the scope of the corporation's line of credit. Kryptowaluty explained that for brokerage and lending activities where cryptocurrency ETFs are used as collateral, the impact will be minimal as long as brokers are willing to assume the associated risk.
The DTC system, or Depository Trust Company, is a key component of the financial infrastructure of the United States, acting as the central securities depository. DTC is part of a larger organization called the Depository Trust & Clearing Corporation (DTCC)
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—KO Kryptowaluty (@KO_Kryptowaluty) April 27, 2024
The DTCC's decision contrasts with the trend observed in other areas of the financial sector, where interest in cryptocurrency-based products has grown. A clear example of this is the recently launched spot Bitcoin ETF in the United States, which, in just three months, attracted more than US$12,5 billion in asset management. In February, it was reported that around 75% of new Bitcoin investments came from 10 spot Bitcoin ETFs approved in the US in January.
Despite this initial enthusiasm, there has been a recent slowdown in net inflows into these ETFs. According to Farside Investors, there were significant net outflows, including a particularly difficult day on April 25 when US spot Bitcoin ETFs saw an outflow of $218 million.
Among these outflows, Grayscale's ETF GBTC stands out, which suffered a reduction of US$82,4197 million in a single day, contributing to a total of net outflows of US$17,185 billion, according to data provided by Farside.
