Depository Trust and Clearing Corporation (DTCC), a well-known financial services provider, made a big choice that could change the cryptocurrency investment scene in the long run: It chose to stop supporting and serving as collateral for Exchange-Traded Funds (ETFs) associated with cryptocurrencies like Bitcoin.
As part of the regular renewal of its line-of-credit facility, DTCC will alter the collateral values for select securities starting on April 30. This could impact the position values of the securities in the collateral monitor. The corporation declared categorically in a statement issued on April 26 that ETFs and other investment vehicles of a similar nature that have Bitcoin or other cryptocurrencies as their underlying assets would have no collateral value.
But as bitcoin enthusiast K.O. Kryptowaluty pointed out in a post on X, this change primarily affects inter-entity payments within the credit line system. This suggests that, depending on each broker’s level of risk tolerance, the use of cryptocurrency ETFs as loan collateral and as a way of making loans may continue as usual.
A financial institution grants a line of credit to an individual or organization in exchange for a loan, allowing the borrower to make withdrawals up to the credit limit that has been set. Usually, the borrower only needs to pay interest on the borrowed balance.
Bitcoin ETF Surge Spurs Goldman Sachs Clients’ Return to Crypto Market
While the DTCC has stated that it opposes exchange-traded funds (ETFs) that invest in bitcoin, other significant market participants have adopted a different attitude. In 2024, Goldman Sachs clients have started re-entering the cryptocurrency market due to a resurgence of interest with the introduction of spot Bitcoin ETFs. Within three months of their launch, these ETFs attracted significant institutional interest, and over $12.5 billion in assets were under management.
According to reports, the ten Bitcoin ETFs authorized on January 11 in the US were used to make 75% of all new Bitcoin investments in February. However, over the last few weeks, fewer people have been entering. Following a $120 million withdrawal the day before, Farside Investors disclosed a net withdrawal of $218 million from spot Bitcoin ETFs on April 25.
Furthermore, on April 25, the U.S. Securities and Exchange Commission (SEC) again postponed making decisions about applications for Bitcoin ETF options. The regulatory body has extended the deadline and asked for public opinion during the next seven days. Rebuttals are to be sent in 35 days or less. The SEC has voiced doubts about whether options on spot Bitcoin ETFs should be governed by the same regulations as stocks.
NYSE American LLC, BOX Exchange LLC, MIAX International Securities Exchange LLC, Nasdaq ISE, LLC, and Cboe Exchange, Inc. are among the exchanges that have applied to trade options on these ETFs.
