Depository Trust and Clearing Corporation (DTCC), a major financial services giant Bitcoin and other to cryptocurrencies made an important decision regarding exposed exchange-traded funds (ETFs). Effective April 30, 2024, DTCC will no longer allocate any collateral to ETFs containing Bitcoin or other cryptocurrencies as underlying assets.
This means that these securities will face a 100% cut-off rate and as a result, no collateral value will be assigned.
This concept, which is called haircut, deduction (rate), margin rate, shave or risk margin in financial markets, is defined as the risk premium paid to prevent the lender from being victimized in case the collateral loses value.
This decision was welcomed by Caitlin Long, CEO and founder of Custodia Bank. “I don’t have a problem with this because it reduces the leverage-based financialization games that Wall Street can play,” Long said. These forces would blame Bitcoin for the inevitable problems even though they have nothing to do with Bitcoin itself. “This is a healthy decision.” said.
*This is not investment advice.
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