DTCC Announces Zero Collateral Value for Bitcoin-Linked ETFs, Impacting Loan Extensions
The Depository Trust and Clearing Corporation (DTCC) has made a statement declaring that it will not assign any collateral value to exchange-traded funds (ETFs) that have exposure to Bitcoin or other cryptocurrencies. Furthermore, the DTCC, a well-known financial services company specializing in clearing and settlement services, will not provide loans against these assets. This decision will take effect on April 30.
This declaration by the DTCC means that ETFs and similar investment instruments that have Bitcoin or other cryptocurrencies as underlying assets will have their collateral value completely removed.
DTCC’s Decision’s Impact on Inter-Entity Settlements
In a post on X, cryptocurrency enthusiast K.O. Kryptowaluty explained that this change will primarily affect inter-entity settlements within the line of credit system. Individual brokers, depending on their risk tolerance, may still use cryptocurrency ETFs for lending and as collateral in brokerage activities without significant repercussions.
While the DTCC has taken a firm stance against crypto ETFs, other traditional players have taken a different approach. Clients of Goldman Sachs have reentered the cryptocurrency market in 2024, driven by renewed interest following the approval of spot Bitcoin ETFs. The introduction of spot Bitcoin ETFs in the United States has sparked increased institutional interest in this investment product. In just three months since their launch, all U.S.-based Bitcoin ETFs have accumulated over $12.5 billion in assets under management.
In February, approximately 75% of new Bitcoin investments were attributed to the 10 spot Bitcoin ETFs approved in the U.S. on January 11. However, the net inflows into these ETFs have recently slowed down, with multiple issuers reporting significant outflows. According to data from Farside Investors, on April 25, spot Bitcoin ETFs in the U.S. experienced a net outflow of $218 million, following a $120 million outflow the previous day. Grayscale’s GBTC ETF alone witnessed a notable single-day outflow of $82.4197 million, bringing the total net outflows from GBTC to a substantial $17.185 billion.
Morgan Stanley to Allow Brokers to Recommend Spot Bitcoin ETFs
As reported, Morgan Stanley, one of the leading financial institutions, is currently exploring the possibility of expanding its sales of Bitcoin ETFs by allowing its approximately 15,000 brokers to actively recommend these products to customers. Currently, Morgan Stanley offers Bitcoin ETFs on an unsolicited basis, meaning that customers must approach their advisors independently to express interest in investing. By enabling advisors to actively recommend these products, the firm could potentially broaden its customer base, although it would also expose itself to additional liability.
Some financial institutions, such as Raymond James Financial and Vanguard, have chosen not to offer cryptocurrency products, citing concerns about their suitability for long-term portfolios. LPL Financial, the largest independent brokerage with over 22,000 brokers, announced plans in February to evaluate which Bitcoin funds it could offer to customers.
Meanwhile, Hong Kong is preparing to launch its highly anticipated spot Bitcoin and Ethereum ETFs by the end of April. The Hong Kong Securities and Futures Commission (SFC) recently granted approval to several fund managers to offer these ETFs in an effort to establish itself as a hub for digital assets by introducing a range of cryptocurrency ETFs.