As a long-term crypto investor with a background in finance, I find the DTCC’s decision to not allocate collateral or offer loans for Bitcoin ETFs a mixed bag. On one hand, it could be perceived as another instance of traditional financial institutions showing reluctance towards embracing cryptocurrencies. However, it is essential to note that this change only pertains to inter-entity settlements within the DTCC’s line of credit system and should not significantly impact the use of cryptocurrency ETFs for lending or collateral in brokerage activities.
DTCC, a prominent financial services organization, has declared that it will not provide collateral nor extend loans for exchange-traded funds (ETFs) linked to Bitcoin and other cryptocurrencies.
Starting from April 30, the DTCC (Depository Trust & Clearing Corporation) will recalculate the value of certain securities’ collateral during its yearly line-of-credit facility update. This adjustment could influence the worth of these securities as displayed in the collateral tracking system.
On April 26, it was announced that the value of collateral held by Exchange-Traded Funds (ETFs) and other investment vehicles backing Bitcoin or other cryptocurrencies would be effectively worth nothing.
Crypto expert K.O. of Kryptowaluty pointed out in a post on X that this modification affects solely the transactions between entities within the line of credit system.
As a researcher studying the intricacies of the US financial system, I can’t overlook the pivotal role played by the Depository Trust Company (DTC), which is an essential component of the Depository Trust & Clearing Corporation (DTCC). DTC functions as the central securities depository within this organization.
— K.O Kryptowaluty (@KO_Kryptowaluty) April 27, 2024
As a researcher studying financial instruments, I would describe a line of credit as follows: This type of arrangement establishes a contract between a borrower, either an individual or a business entity, and a financial institution. The agreement grants the borrower access to a predefined maximum amount of funds on demand, which can be withdrawn whenever necessary, up to the agreed limit.
The borrower can use these funds as needed and normally pays interest only on the amount borrowed.
Based on Kryptowaluty’s analysis, the employment of cryptocurrency Exchange-Traded Funds (ETFs) for lending purposes and as collateral in brokerage transactions is expected to persist, contingent upon the risk appetite of each specific broker.
The DTCC has voiced its disapproval towards cryptocurrency Exchange-Traded Funds (ETFs), but other notable institutions have taken a more favorable stance. Goldman Sachs clients have recently resumed investing in cryptocurrencies during the year 2024, spurred on by renewed interest generated by the introduction of Bitcoin spot ETFs.
Over the past few months, these ETFs have witnessed significant inflow of institutional investment, accumulating approximately $12.5 billion in total assets.
Approximately 75% of recent Bitcoin investments in the United States can be attributed to the ten Bitcoin ETFs that received approval on January 11 and became operational in February.
In contrast to the recent increase, there has been a drop-off in investments during the past few weeks. For instance, Farside Investors recorded a net withdrawal of $218 million from Bitcoin ETFs on April 25, after having withdrawn $120 million the day prior.
On April 25, the SEC postponed its verdict on Bitcoin ETF proposals once more. The commission is requesting public feedback within the subsequent 21-day period, followed by rebuttals within 35 days.
The agency is pondering if the trading mechanics for Bitcoin ETFs that can be bought and sold immediately should adhere to the same regulations as traditional stock markets.
As a researcher examining the latest developments in the exchange-traded fund (ETF) market, I’ve come across some noteworthy applications from various exchanges. Specifically, Cboe Exchange, Inc., BOX Exchange LLC, MIAX International Securities Exchange LLC, Nasdaq ISE, LLC, and NYSE American LLC have all applied to introduce options trading on certain ETFs.
The SEC has postponed making judgments on Grayscale and Bitwise’s proposals to launch Bitcoin options ETFs, with the next evaluation scheduled for May 29.
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2024-04-27 18:46