Caitlin Long, the CEO of Custodia Bank, praised the recent determination by the Depository Trust & Clearing Corporation (DTCC) to assign a zero collateral value to Exchange-Traded Funds (ETFs) with underlying assets like Bitcoin (BTC) and other cryptocurrencies. Effectively starting on April 30, DTCC embarks on implementing changes to collateral values for specific securities as part of its year-end line-of-credit facility overhaul.

In light of DTCC's move, Long sees this as a positive step for Bitcoin, regarding it as a healthy measure within the financial system. This revolutionary step alters the game by imposing a 100% haircut on securities tied to Bitcoin or cryptocurrencies, intending to mitigate risks associated with them. Long also underscored its crucial role in curbing leverage-focused financialization maneuvers that Wall Street could potentially exploit for gains.

Supporting DTCC’s decision, Long took to the social media platform X to express her approval, highlighting how it closes the door on leveraging-oriented financial endeavors that Wall Street could have executed, redirecting blame towards Bitcoin for any ensuing issues, despite Bitcoin's innocence. She concluded by affirming, “This is a healthy decision.” While DTCC's decision may impact collateral values for specific securities under its line-of-credit facility, the functionality of crypto ETFs for lending and brokerage collateral purposes remains unaltered. This announcement arrives amidst a surge in institutional interest towards crypto investments following the debut of Spot Bitcoin ETFs.

In a mere three-month period post their launch, U.S. Bitcoin ETFs have collectively amassed over $12.5 billion in assets under management (AUM), signifying a significant shift in investor attitudes towards digital assets. Despite this marked interest, Bitcoin ETFs have witnessed a downturn recently with a substantial outflow of $328 million this week.

Custodia Bank presently finds itself embroiled in a legal dispute with the Federal Reserve. In a recent development, Custodia Bank has initiated an appeal against a ruling rendered by a Wyoming district judge. The ruling reinforces the Federal Reserve’s authority to deprive Custodia of access to a Master Account.

Navigating through this legal turbulence, Custodia Bank, under Long's leadership, has taken a stand by filing a notice of intent to appeal since the judge's ruling on March 29, 2024. This move showcases Custodia's resolve to challenge the judgment and possibly pursue further legal avenues in the ongoing tussle with the Federal Reserve. Should the appeal yield a favorable outcome, Custodia Bank stands poised to leverage this advantage in their ongoing legal battle.