In a move that could have significant implications for the crypto investment landscape, the Depository Trust and Clearing Corporation (DTCC) has announced that it will not allocate any collateral to exchange-traded funds (ETFs) with exposure to Bitcoin or other cryptocurrencies, nor will it extend loans against them. This decision came as part of DTCC’s annual line-of-credit facility renewal, where the financial services company implements changes to collateral values for specific securities.
Effective April 30, 2024, the DTCC’s notice means that ETFs and similar investment instruments with Bitcoin or other cryptocurrencies as underlying assets will not be assigned any collateral value, resulting in a 100% reduction in their collateral value. This decision effectively excludes these crypto-linked investment vehicles from collateral eligibility within the DTCC’s line-of-credit system.
While this announcement has raised concerns among some market participants, cryptocurrency enthusiast K.O. Kryptowaluty clarified on X (formerly Twitter) that the ruling would only apply to inter-entity settlements within the line of credit system. According to Kryptowaluty, the use of cryptocurrency ETFs for lending and as collateral in brokerage activities will continue without impact, depending on individual brokers’ risk tolerance.
The DTCC’s stance on crypto ETFs contrasts with the approach taken by other traditional financial players. For instance, Goldman Sachs’ clients have begun reentering the crypto market in 2024, driven by renewed interest following the approval of spot Bitcoin ETFs in the United States.
The introduction of spot Bitcoin ETFs has spurred increasing institutional interest in this investment product, with all U.S.-based Bitcoin ETFs accumulating over $12.5 billion in assets under management within three months of their launch. In February, an estimated 75% of new Bitcoin investments came from the 10 spot Bitcoin ETFs approved in the U.S. on January 11.
However, net inflows to these ETFs have recently slowed down, with multiple issuers reporting significant outflows. According to data from Farside Investors, spot Bitcoin ETFs in the U.S. saw a net outflow of $218 million on April 25, following a $120 million outflow the previous day. Grayscale’s GBTC ETF, in particular, saw a notable single-day outflow of $82.4197 million, with total net outflows from GBTC amounting to a substantial $17.185 billion, as per Farside’s data.
