The Depository Trust and Clearing Corporation (DTCC) has announced that exchange-traded funds (ETFs) and similar products with Bitcoin (BTC) or other cryptocurrencies will not be assigned any collateral value effective April 30, 2024.
The DTCC, a major entity that provides clearing and settlement services across the financial markets, made this collateral change as part of its annual line-of-credit facility renewal process.
According to the official notice, the latest decision means a 100% reduction in the collateral value for crypto ETFs and related investments.
However, a crypto trader on the X platform, formerly Twitter, clarified in a post that the policy change would only apply to inter-entity settlement within the line of credit system.
Subsequently, a line of credit is a borrowing arrangement allowing a borrower to draw funds up to a predetermined limit, paying interest only on the amount borrowed. The use of cryptocurrency ETFs for lending and collateral in brokerage activities will continue without impact, depending on brokers' risk tolerance.
While DTCC has taken a stance against crypto ETFs, other traditional players have not followed suit. Clients have begun re-entering the crypto market this year, driven by renewed interest following the approval of spot Bitcoin ETFs.
Notably, the introduction of spot Bitcoin ETFs in the United States spurred increasing institutional interest. Within three months of launch, BTC ETFs gained about $12.50 billion. In February, over 75% of new Bitcoin investments came from the 10 approved spot BTC ETFs.
However, net inflows to ETFs have slowed, with issuers reporting significant outflows. A report from Traders Union stated spot Bitcoin ETFs in the United States saw a net outflow of $218 million on April 25, following a $120 million outflow the prior day.
Moreover, one exchange-traded fund saw a single-day outflow of $82.42 million. Correspondingly, recent data indicates the total net outflow is $17.185 billion.