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Why New DTCC Directive Is Both Bullish and Bearish By U.Today
U.Today – In a recent ruling, the Depository Trust and Clearing Corporation (DTCC) made a decision against exchange-traded funds (ETFs) that are exposed to or any other cryptocurrencies.
DTCC plans to change collateral policy
Consequently, the corporation has earmarked April 30 as the day to implement changes to its collateral value for these special securities during its annual line-of-credit facility renewal.
DTCC sees this as an avenue to revolutionize position values in the collateral monitor. For spot Bitcoin ETFs like BlackRock (NYSE:)’s IBIT, Fidelity Investment’s FBTC and other crypto ETPs, this would result in a 100% reduction in their collateral value.
Cryptocurrency enthusiast K.O. Kryptowaluty believes that this new development applies to only inter-entity settlement within the line of credit system. He further explained that the use of crypto ETFs for lending and as collateral in brokerage activities will continue without any consequences.
However, he pointed out that it is highly dependent on individual brokers’ risk tolerance.
DTCC’s collateral policy affects ETF investors
According to Autism Capital, DTCC’s announcement could potentially translate to less liquidity but also more risks for spot crypto ETF investors.
Looking on the bright side, such a decision may equally contribute to mitigating the negative interference of Wall Street companies in the growing crypto ETF niche. Only time will tell how it turns out for investors and other parties involved.