DTCC Announces Collateral Changes for Crypto ETFs


The Depository Trust and Clearing Corporation (DTCC), a major financial services giant, has made a significant decision regarding exchange-traded funds (ETFs) with exposure to Bitcoin or cryptocurrencies. Effective April 30, 2024, DTCC will implement changes to collateral values, resulting in a 100% reduction in collateral value for these ETFs.

The announcement, made on April 26, states that DTCC will not allocate any collateral to ETFs with Bitcoin or cryptocurrencies as underlying assets during its annual line-of-credit facility renewal. This decision could potentially impact position values in the Collateral Monitor.

DTCC and Bitcoin

However, it’s important to note, as clarified by cryptocurrency enthusiast K.O. Kryptowaluty in a post on X, that this change specifically applies to inter-entity settlement within the Line of Credit (LOC) system. The LOC system involves borrowing arrangements between financial institutions and individuals or entities, allowing the borrower to access funds up to a predetermined credit limit.

Kryptowaluty pointed out that despite DTCC’s decision, cryptocurrency ETFs can still be used for lending and as collateral in brokerage activities, depending on individual brokers’ risk tolerance.

DTCC Takes a Cautious Approach to Crypto ETFs

While DTCC’s stance represents a cautious approach to crypto ETFs, other traditional players have taken different routes. For instance, clients of Goldman Sachs have been reentering the crypto market this year, driven by renewed interest following the approval of spot Bitcoin exchange-traded funds.

The introduction of spot Bitcoin ETFs has sparked increased institutional interest in this investment product. Within just three months of their launch, all United States Bitcoin ETFs have accumulated over $12.5 billion in assets under management (AUM).

Inflows into ETFs Slow Down

However, after a strong initial launch, overall inflows into Bitcoin ETFs have recently slowed down. In the past few days, multiple ETF issuers have reported significant outflows from spot Bitcoin ETFs. According to data from Farside Investors, there was a net outflow of $218 million from spot Bitcoin ETFs in the U.S. on April 25, following a $120 million outflow the previous day.

Grayscale’s GBTC ETF experienced a notable single-day outflow of $82.4197 million. The historical net outflow for GBTC now totals a substantial $17.185 billion, according to data from Farside Investors.

Adoption of ETFs

BNY Mellon, a prominent financial institution, announced exposure to spot Bitcoin (BTC) exchange-traded funds (ETFs) through recent filings with the US SEC. 

Further, Morgan Stanley, a leading global investment bank and wealth management firm, also empowered its 15,000 brokers to suggest spot Bitcoin exchange-traded funds (ETFs) to customers.

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