DTCC Refutes Bitcoin’s Value: Cryptocurrency ETF Collateral Worthless from 4/30

The Depository Trust & Clearing Corporation (DTCC) announced today that it will not provide any collateral value to ETFs and investment tools investing in Bitcoin or other cryptocurrencies. This announcement comes as part of the annual update to credit limits. The adjustment in collateral value for certain securities will take effect on April 30, 2024. The update to the rules may impact the valuation of positions used in collateral monitoring. DTCC’s decision to implement a 100% valuation discount on cryptocurrency-related ETFs and investment tools has raised concerns about the impact on institutional investment strategies. However, a cryptocurrency expert explained that this update only applies to settlements between entities within the Letter of Credit (LOC) system. He emphasized the importance of distinguishing between different settlement methods such as Delivery versus Payment (DvP) and LOC in financial transactions. DvP is the standard settlement mechanism used in most securities transactions, ensuring that securities are only delivered when the corresponding payment (cash or other assets) is made. On the other hand, LOC is a financial instrument that allows market participants to borrow funds for short-term trading or meet other liquidity needs. According to his assessment, the DTCC’s update will not have a significant impact on cryptocurrency investments.