Will not give loans with collateral in crypto funds

The price of the digital cryptocurrency bitcoin fell 1.6 percent to $62,955 on Saturday, after the US Depository Trust and Clearing Corporation (DTCC) announced that it will not assign any collateral to bitcoin ETFs, which are exchange-traded funds with exposure to bitcoin or other cryptocurrencies. Such ETFs provide an opportunity to invest in crypto without having to buy the cryptocurrencies directly.

No loans will be granted for such funds either, it is stated.

The decision will mean that actors who use settlement services from DTCC will not be able to use cryptocurrency ETFs as collateral when applying for loans or similar services in DTCC’s system. According to CoinTelegraph, the change is expected to affect how ETFs are treated when it comes to financial stability and credit ratings.

Can be used as collateral

However, Marketwatch writes that X-user KO Kryptowaluty, who is a well-known crypto enthusiast, that this will only apply to settlements between parties within credit system lines.

A line of credit is a loan agreement between a financial institution and a person or entity that allows the borrower to link funds up to a predetermined credit limit.

According to Kryptowaluty, the use of cryptocurrency ETFs for lending and as collateral in brokerage activities will continue without impact, depending on individual brokers’ risk tolerance.

Renewed interest

DTCC has taken a stand against crypto ETFs, but that does not apply to all other traditional players. According to Marketwatch, clients of Goldman Sachs have begun to withdraw from the crypto market, driven by renewed interest following the approval of spot bitcoin ETFs, i.e. bitcoin-linked exchange-traded funds.

The introduction of spot bitcoin ETFs in the US has led to growing institutional interest. Three months after launch, all US-based bitcoin ETFs have raised over $12.5 billion in assets under management, writes Marketwatch.

In February, an estimated 75 percent of new bitcoin investments came from the 10 spot Bitcoin ETFs approved in the US on January 11.

However, net deposits to the ETFs have decreased recently. Several ETF issuers have recently reported significant outflows. According to Farside Investors, spot Bitcoin ETFs in the US had a net outflow of $218 million on April 25, followed by an outflow of $120 million the previous day.