What happens as an individual bank becomes more insolvent? My guesses:
- they issue fewer loans
- they chase more deposits (higher yields, bonuses, etc.)
- Since the fed recognizes the underwater treasuries at full value, they recognize them as solvent and keep lending to the bank. 

So, they are just a bank run away from collapsing, which is why they are cutting off access to Bitcoin markets where they would have to clear with the market maker. If you buy ETF then the banks can move around the balances and underwater securities (since banks can recognize at full value). As long as they cooperate, it seems the larger banks doing clearances for Bitcoin ETF purchases will have take on more and more risk by accepting underwater treasuries for clearances.

If the larger ETF clearing bank actually buys Bitcoin, they will have to spend actual liquid cash while accumulating more and more underwater treasuries.