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DTCC Announces Exclusion of Collateral for Crypto ETFs, Impacting Market Dynamics

The Depository Trust and Clearing Corporation (DTCC), a key player in financial services offering clearing and settlement services, has declared its decision not to allocate any collateral to exchange-traded funds (ETFs) linked to Bitcoin or other cryptocurrencies, and will not extend loans against them.

Effective April 30, 2024, DTCC will enact alterations to collateral values for specific securities during its annual line-of-credit facility renewal, potentially impacting position values in the collateral monitor.

This announcement made on April 26 signifies that ETFs and analogous investment instruments backed by Bitcoin or other cryptocurrencies will be deprived of any collateral value, resulting in a complete reduction of 100% in their collateral value.

However, as cryptocurrency enthusiast K.O. Kryptowaluty elucidated in a post, this decision will solely affect inter-entity settlement within the line of credit system.

A line of credit represents a borrowing agreement between a financial institution and an individual or entity, permitting the borrower to access funds up to a predetermined credit limit, with interest typically applied solely to the borrowed amount.

According to Kryptowaluty, leveraging cryptocurrency ETFs for lending and as collateral in brokerage activities will proceed unaffected, contingent on the risk tolerance of individual brokers.

While DTCC has taken a stance against crypto ETFs, the sentiment is not mirrored across all traditional players.

Goldman Sachs’ clients have reentered the crypto market in 2024, propelled by revived interest post the approval of spot Bitcoin ETFs.

READ MORE: Hong Kong Approves First Wave of Spot Bitcoin and Ether ETFs for Trading

The debut of spot Bitcoin ETFs in the United States has ignited escalating institutional interest in this investment vehicle.

Within a mere three months of their introduction, all U.S.-based Bitcoin ETFs have amassed over $12.5 billion in assets under management.

In February, an estimated 75% of fresh Bitcoin investments stemmed from the 10 spot Bitcoin ETFs greenlit in the U.S. on Jan. 11.

Nevertheless, net inflows into the ETFs have recently decelerated. Various ETF issuers have reported substantial outflows of late.

As per Farside Investors, spot Bitcoin ETFs in the U.S. witnessed a net outflow of $218 million on April 25, following a $120 million outflow the prior day.

Grayscale’s GBTC ETF observed a notable single-day outflow of $82.4197 million. Data from Farside indicates a significant total net outflow from GBTC, tallying up to $17.185 billion.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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