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In a recent ruling, the Depository Trust and Clearing Corporation (DTCC) made a decision against exchange-traded funds (ETFs) that are exposed to Bitcoin or any other cryptocurrencies.
DTCC plans to change collateral policy
The financial services company that provides clearing and settlement services for the capital markets players stated that it would not provide collateral nor extend loans to ETFs that fall into the previously described category.
Alex DovbnyaConsequently, the corporation has earmarked April 30 as the day to implement changes to its collateral value for these special securities during its annual line-of-credit facility renewal.
DTCC sees this as an avenue to revolutionize position values in the collateral monitor. For spot Bitcoin ETFs like BlackRock's IBIT, Fidelity Investment's FBTC and other crypto ETPs, this would result in a 100% reduction in their collateral value.
Cryptocurrency enthusiast K.O. Kryptowaluty believes that this new development applies to only inter-entity settlement within the line of credit system. He further explained that the use of crypto ETFs for lending and as collateral in brokerage activities will continue without any consequences.
However, he pointed out that it is highly dependent on individual brokers’ risk tolerance.
DTCC's collateral policy affects ETF investors
Noteworthy, this move is likely to spark some speculations and concerns from spot Bitcoin ETF investors who are wondering what the future holds for them. These investors are likely to think that their investments are no longer valuable. Such perception could trigger a massive sell-off, causing the AUM of the ETFs and their underlying cryptocurrency to drop significantly.
According to Autism Capital, DTCC's announcement could potentially translate to less liquidity but also more risks for spot crypto ETF investors.
Looking on the bright side, such a decision may equally contribute to mitigating the negative interference of Wall Street companies in the growing crypto ETF niche. Only time will tell how it turns out for investors and other parties involved.
Alex Dovbnya
Gamza Khanzadaev
Dan Burgin
Vladislav Sopov