The Depository Trust and Clearing Corporation (DTCC), a financial services entity providing clearing and settlement services for financial markets, has declared its decision to refrain from offering collateral to exchange-traded funds (ETFs) associated with Bitcoin or other cryptocurrencies and will not extend loans against them.

Commencing on April 30, 2024, DTCC will implement adjustments to collateral valuations for specific securities during its annual line-of-credit facility renewal, potentially impacting position valuations in the collateral monitor.

This announcement made on April 26 indicates that ETFs and similar investment instruments with Bitcoin BTCUSD or alternative cryptocurrencies as underlying assets will no longer be assigned any collateral value, leading to a complete devaluation of their collateral assets.

However, as highlighted in a statement by cryptocurrency enthusiast K.O. Kryptowaluty, this alteration will solely impact inter-entity settlements within the line of credit framework.

A line of credit functions as a credit arrangement between a financial institution and an individual or entity, allowing the borrower to withdraw funds up to a predetermined credit threshold. The borrower can utilize these funds as needed and typically incurs interest solely on the borrowed sum.

According to Kryptowaluty, the utilization of cryptocurrency ETFs for lending purposes and as collateral in brokerage operations will continue uninterrupted, subject to the risk appetite of individual brokers.

Despite DTCC’s stance on crypto ETFs, this policy does not extend to other traditional entities. Clients of Goldman Sachs have begun reentering the cryptocurrency market in 2024, influenced 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 vehicle. Within three months of their launch, all U.S.-based Bitcoin ETFs have amassed over $12.5 billion in assets under management.

In February, around 75% of new Bitcoin investments originated from the 10 spot Bitcoin ETFs authorized in the U.S. on January 11.

However, inflows into the ETFs have recently slowed down. Several ETF providers have reported significant outflows in recent periods. According to Farside Investors, U.S.-based spot Bitcoin ETFs witnessed a net outflow of \(218 million on April 25, following a \)120 million outflow the day before.

Grayscale’s GBTC ETF encountered a substantial single-day outflow of \(82.4197 million. Data from Farside indicates that the cumulative net outflows from GBTC amount to a notable \)17.185 billion.