DTCC Declares Bitcoin ETFs Ineligible as Collateral

The Depository Trust & Clearing Corporation (DTCC) has declared that as part of its annual line-of-credit facility renewal, it will not assign collateral value to exchange-traded funds (ETFs) that are linked to Bitcoin or other cryptocurrencies. This policy will take effect on April 30, 2024, and is part of a broader reassessment of collateral values that also includes a 70% reduction in the evaluated market price for bonds rated B1 to B3. While the DTCC's decision will affect inter-entity settlement within the Line of Credit system, it does not impact the use of crypto ETFs for lending purposes or as collateral in brokerage activities.

In contrast to the DTCC's cautious stance, the interest in cryptocurrency ETFs continues among traditional financial institutions. For instance, BNY Mellon has expressed its intention to gain exposure to Bitcoin ETFs. Meanwhile, the cryptocurrency market has experienced volatility following these developments, with Bitcoin's value being notably affected. Fusion Media has issued a reminder that trading in financial instruments and cryptocurrencies carries significant risk and that the prices are subject to fluctuation due to a range of external factors.

Despite DTCC's new policy, the overall acceptance and institutional interest in cryptocurrency and related financial products such as ETFs continue to grow, as evidenced by the actions of firms like Goldman Sachs and BNY Mellon. This dynamic landscape reflects the evolving relationship between traditional financial structures and the emerging digital asset sector.