A cadre of former Citigroup Inc. executives has unveiled a groundbreaking financial innovation tailored for the Bitcoin sphere: Bitcoin Deposit Receipts, or BTC DR. This groundbreaking security instrument is poised to grant accredited investors unfettered exposure to Bitcoin without necessitating formal registration with the United States Securities and Exchange Commission (SEC), as attested by the corporation.
This novel approach is expected to circumvent the protracted approval timelines typically associated with Bitcoin exchange-traded funds (ETFs). The brainchild of Receipts Depositary Corporation (RDC), a pioneering startup, BTC DR is slated to make its debut in the forthcoming weeks, as disclosed in an official press communiqué.
This pioneering endeavor falls squarely within the regulatory ambit of the Securities Act of 1933, a statute which decrees that transactions of this ilk be exempt from the SEC’s registration purview. It is worth noting that American Depositary Receipts (ADRs) were previously issued under this same regulatory framework, facilitating dollar-based investments in foreign company shares and thereby serving as a precedent for the nascent BTC DR instrument, according to the executives involved.
In a tangentially related development, today marks the commencement of the “approval window” for Bitcoin ETFs, a development of keen interest for market participants. This signals a pivotal moment for those with a vested interest in the Bitcoin ecosystem.
Ankit Mehta, a luminary figure in the realm of finance who co-founded RDC and previously held a senior position at Citigroup, elucidated the core objective of these depositary receipts. Mehta expounded that the aim is to furnish hedge funds, family offices, corporate entities, and major institutional investors with a vehicle for Bitcoin investment that complies with the DTC (Depository Trust Company) settlement system. This innovative offering enables investors to secure unmediated ownership within the purview of U.S. clearing systems.
The eligibility of a security for deposition with the Depository Trust Company (DTC), the foremost institution entrusted with custody and settlement of financial securities in the United States, signifies its suitability for trading and settlement through the DTC’s electronic systems. This bears paramount significance as it augments the efficiency of electronic securities transaction settlements, leading to a substantial reduction in the time and expenses associated with physical document transfers. Furthermore, it is indicative of regulatory adherence, furnishing an additional layer of assurance for investors.
In the context of Bitcoin depositary receipts, DTC eligibility carries the implication that these financial instruments can be seamlessly integrated into the conventional financial framework. This facilitates their accessibility and trading by institutional investors and other key stakeholders in the market.
RDC enjoys robust backing from prominent financial institutions, including Franklin Templeton (which is also an ETF applicant), BTIG, and Broadhaven Ventures. Additionally, the firm has solidified partnerships with Broadridge Corporate Issuer Solutions for transfer agent services and with Anchorage Digital Bank for safeguarding the underlying Bitcoin assets.
Diogo Mónica, co-founder and president of Anchorage Digital, underscores the significance of transplanting practices and standards from the traditional financial sector into the digital asset arena. Mónica asserts that BTC DRs present an ideal intermediary solution for conventional institutions seeking exposure to Bitcoin but apprehensive due to regulatory ambiguities.
The notion of offering depositary receipts for digital assets was originally conceived at Citigroup in 2018, a project in which RDC’s three co-founders—Ankit Mehta, Ishaan Narain, and Bryant Kim—participated. However, Mehta underscores that their offering diverges from the earlier Citi exploration in this sphere.
The recent surge in Bitcoin’s valuation over the past weeks is attributed to heightened anticipation surrounding the SEC’s forthcoming decision regarding the approval of Bitcoin spot ETFs, a subject extensively covered by CriptoNoticias. Although most analysts prognosticate a favorable ruling by the SEC on all 14 ETF applications, this new instrument is poised to provide a viable alternative for institutional investors seeking regulated exposure to Bitcoin in the event of an adverse ruling.