The Depository Trust and Clearing Corporation (DTCC) recently announced a significant change in its collateral policy, affecting ETFs with exposure to Bitcoin and other cryptocurrencies. This change will impact the collateral values for specific securities, potentially affecting their position values in the collateral monitor.

According to the statement released by DTCC on April 26, ETFs and similar investment vehicles with Bitcoin or other cryptocurrencies as underlying assets will see their collateral value reduced to zero. It’s important to note that this change specifically applies to inter-entity settlements within the line of credit system.

The DTC system, part of the larger organization DTCC, is a crucial component of the financial infrastructure in the United States, serving as the central securities depository. Despite this change in collateral policy, cryptocurrency ETFs are still being used for lending and as collateral in brokerage activities, depending on the risk tolerance of individual brokers.

While DTCC has expressed opposition to cryptocurrency ETFs, other established players in the financial market, such as Goldman Sachs clients, have re-entered the cryptocurrency market in 2024. The launch of spot Bitcoin ETFs has fueled this renewed interest, with over $12.5 billion in assets under management within three months since their introduction.

In February, the ten Bitcoin ETFs approved in the U.S. accounted for around 75% of new Bitcoin investments. However, recent weeks have shown a decline in inflows, with Farside Investors reporting a net outflow of $218 million from spot Bitcoin ETFs on April 25. The U.S. Securities and Exchange Commission (SEC) has once again delayed its decision on applications for spot Bitcoin ETF options, extending the deadline for public comments and rebuttals.

Several exchanges have applied to offer options trading on these ETFs, and the SEC has deferred decisions on Grayscale and Bitwise’s applications to introduce Bitcoin options ETFs. The next review date is set for May 29. Despite the regulatory challenges, the interest in cryptocurrency ETFs remains strong in the financial market.

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