Former Citigroup executives founded a startup to introduce securities backed by bitcoin.

A recent Bloomberg report revealed that a group of former Citigroup executives had introduced an investment offering called Bitcoin (BTC) depositary receipts (BTC DRs). 

These securities, backed by the largest cryptocurrency in the market, are being positioned as an alternative to spot-Bitcoin exchange-traded funds (ETFs) that require approval from US regulators. 

The startup behind this initiative, Receipts Depositary Corporation (RDC), plans to issue the first Bitcoin depositary receipts to qualified global institutional investors, providing them a convenient and regulated way to gain exposure to BTC.

 

Summary Points:

  1. Introduction of Bitcoin Depositary Receipts (BTC DRs):
  • Former Citigroup executives have founded Receipts Depositary Corporation (RDC) to launch Bitcoin depositary receipts (BTC DRs).
  • BTC DRs are investment securities backed by Bitcoin, offering an alternative to spot-Bitcoin exchange-traded funds (ETFs) that require regulatory approval.
  1. Differences Between BTC DRs and Bitcoin ETFs:
  • BTC DRs bypass the need for regulatory approval, positioning themselves as securities exempt from registration under the Securities Act of 1933.
  • Unlike Bitcoin ETFs that grant indirect ownership, BTC DRs provide institutional investors with direct ownership of Bitcoin-based securities.
  • BTC DRs leverage US-regulated market infrastructure and are cleared through the Depository Trust Co., offering a distinct investment avenue.
  1. Ownership Structure and Market Infrastructure Distinctions:
  • BTC ETFs provide indirect ownership through shares or units, while BTC DRs allow institutional investors to own Bitcoin-based securities directly.
  • BTC ETFs operate within ETF market infrastructure, while BTC DRs leverage US-regulated market infrastructure, clearing through the Depository Trust Co.
  1. Addressing Institutional Hesitations:
  • BTC DRs aim to address institutional concerns about directly holding BTC by providing a regulated and familiar investment instrument.
  • The depositary receipt structure resembles American depositary receipts (ADRs), allowing institutions to indirectly hold BTC without direct exposure to the cryptocurrency market.
  1. Key Players in BTC DRs Implementation:
  • Broadridge Corporate Issuer Solutions will be the transfer agent to ensure a robust and secure offering.
  • Anchorage Digital Bank National Association will handle the custody of the underlying Bitcoin.
  1. Outlook for Institutional Adoption in 2024:
  • Diogo Mónica, co-founder and president of Anchorage Digital, predicts depositary receipts as a significant trend in 2024.
  • BTC DRs aim to bridge the gap between traditional finance market standards and the digital-asset ecosystem, providing institutions with direct exposure to BTC amid regulatory uncertainties.
  1. Conclusion:
  • As regulatory decisions on BTC ETFs are awaited, Bitcoin depositary receipts emerge as an intriguing alternative for institutions seeking regulated participation in the growing cryptocurrency market.

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