By
Chimamanda U. Martha
April 26th, 2024
Some institutions are hesitant to buy Bitcoin directly due to challenges in the crypto markets, such as security risks and regulatory uncertainty. BTC DRs aim to address these concerns.
As the anticipation surrounding the approval or denial of spot-Bitcoin Exchange-Traded Funds (ETFs) intensifies, a group of former Citigroup Inc (NYSE: C). executives are pioneering a novel approach to offer securities backed by Bitcoin without seeking the approval of US regulators.
This innovative product, termed Bitcoin depositary receipts (BTC DRs), aims to provide institutions with a way to access Bitcoin securities without relying on traditional ETFs.
The Birth of Bitcoin Depositary Receipts
Receipts Depositary Corporation (RDC), the startup behind BTC DRs, announced its plans to issue the first receipts to qualified global institutional investors in transactions exempt from registration under the Securities Act of 1933. The structure of BTC DRs mirrors that of American depositary receipts representing foreign stocks, creating a bridge between traditional financial instruments and the growing digital asset ecosystem.
Ankit Mehta, the co-founder and chief executive of RDC and a former executive at Citigroup, explained in an interview, saying:
“We are really a conversion tool for asset owners today, whether they are hedge funds, family offices, corporations, large institutional investors, that want to take their Bitcoin and convert it into a DTC-eligible security and enjoy direct ownership in the US clearances.”
To ensure the smooth functioning of BTC DRs, RDC has enlisted the services of industry leaders. Broadridge Corporate Issuer Solutions will act as the transfer agent, facilitating the issuance and transfer of the receipts.
Additionally, Anchorage Digital Bank National Association will handle the custody of the underlying Bitcoin, ensuring secure storage for institutional investors. Noteworthy backers of RDC include Franklin Templeton, BTIG, and Broadhaven Ventures, according to the company’s press release.
Bitcoin Depositary Receipts: Complementing Bitcoin ETFs
As Bitcoin recently jumped to $45,000, anticipation has grown regarding the potential approval of spot Bitcoin ETFs by the US Securities and Exchange Commission. In this context, BTC DRs positions its offering as a complementary product to Bitcoin ETFs. Mehta emphasized that BTC DRs provide direct ownership of Bitcoin for qualified institutions, distinguishing them from Bitcoin ETFs, which are redeemed for cash.
Mehta further highlighted that some regulated institutions are hesitant to buy Bitcoin directly due to challenges in the crypto markets, such as security risks and regulatory uncertainty. BTC DRs, by bringing market standards from traditional finance to the digital asset ecosystem, aim to address these concerns.
Ishaan Narain, one of RDC’s co-founders and a former Citigroup executive, stressed the importance of partnering with the right entities to provide the segregated services that institutional investors seek.
The co-founders of RDC, who previously worked for Citi’s depositary-receipt team, draw parallels between the challenges faced by Americans investing in foreign companies and those encountered in the crypto markets. They believe BTC DRs, by incorporating market standards from traditional finance, will address these challenges and provide institutions with a more comfortable means of exposure to Bitcoin.
Notably, Citigroup previously announced the establishment and piloting of Citi Token Services, a blockchain and smart contract-enabled technology designed to provide institutional clients with digital asset solutions.
