Custodia Bank CEO Hails DTCC Decision On Zero Collateral Value Of Bitcoin ETF

Custodia Bank CEO Caitlin Long has lauded the recent decision by the Depository Trust & Clearing Corporation (DTCC) to assign zero collateral value to Exchange-Traded Funds (ETFs) featuring Bitcoin (BTC) or other cryptocurrencies as underlying assets. On April 30, DTCC will start enacting amendments to collateral values for particular securities as part of its annual line-of-credit facility renewal.

Caitlin Long’s Statement On Zero Collateral Value Of Bitcoin ETFs

Effective immediately, DTCC’s decision means that securities with exposure to Bitcoin or cryptocurrencies will face a 100% haircut. Moreover, this move is aimed at mitigating risk within the financial system. Whilst, Long emphasized the importance of this decision in reducing the leverage-based financialization games that Wall Street could have potentially played.

In a post on social media platform X, Long expressed her support for DTCC’s decision. She stated, “I have no problem with this because it reduces the leverage-based financialization games that #WallSt could have played (& upon which TPTB would have blamed #Bitcoin for the inevitable problems even tho they’d have had nothing to do with Bitcoin itself).”

Furthermore, she concluded, “This is a healthy decision.” DTCC’s decision may impact the collateral values for certain securities within its line-of-credit facility. However, it’s important to note that the role of crypto ETFs for lending purposes and as collateral in brokerage activities remains unaffected. The announcement from DTCC comes amidst a backdrop of growing institutional interest in crypto investment products, particularly with the recent launch of Spot Bitcoin ETFs.

Within just three months of their launch, all U.S. Bitcoin ETFs have collectively amassed over $12.5 billion in assets under management (AUM). Thus, signaling a significant shift in investor sentiment towards digital assets. However, Bitcoin ETFs are losing steam lately with gigantic outflows of $328 million this week.

Also Read: DTCC Announces ETFs with Bitcoin Exposure to Hold Zero Collateral Value for Loans

Custodia Bank Vs Federal Reserve

Currently, Custodia Bank is engaged in a legal tussle with the Federal Reserve. In the latest move, Custodia Bank has taken steps to appeal a recent ruling by a Wyoming district judge. The ruling asserts that the Federal Reserve has the authority to deny Custodia access to a Master Account.

However, Custodia Bank, under the leadership of Long, filed a notice of intent to appeal following the judge’s decision on March 29, 2024. This move signals Custodia’s determination to challenge the ruling and possibly seek further legal recourse in the ongoing dispute with the Federal Reserve. In case of a positive outcome regarding the appeal, Custodia Bank would surely leverage it for an advantage in the lawsuit.

Also Read: Cathie Wood’s Ark Invest Dumps $6.7M ProShares Bitcoin ETF (BITO)