A new service, named Bitcoin depositary receipts, is set to launch. These receipts function much like American depositary receipts, which stand for foreign stocks. The company behind this, Receipts Depositary Corporation (RDC), intends to provide the initial Bitcoin depositary receipts to qualified global institutional investors without needing registration under the Securities Act of 1933.
Dubbed BTC DRs, this service grants institutions access to Bitcoin securities through a regulated US market system and cleared via the Depository Trust Co. Essentially, RDC acts as a tool for asset owners—be it hedge funds, family offices, or large investors—who wish to convert their Bitcoin into a DTC-eligible security for direct ownership within US clearances.
Ankit Mehta, RDC’s co-founder and CEO, mentioned that their aim is to facilitate the conversion of Bitcoin into a DTC-eligible security, enabling direct ownership for various institutional entities. The company’s transfer agent will be Broadridge Corporate Issuer Solutions, while custody of the underlying Bitcoin will be handled by Anchorage Digital Bank National Association. Investors such as Franklin Templeton, BTIG, and Broadhaven Ventures are among those backing RDC, according to their press release.
The value of Bitcoin recently surged above $45,000, hinting at growing optimism about the potential approval of exchange-traded funds directly investing in Bitcoin by the US Securities and Exchange Commission. Mehta believes that RDC’s offering will complement Bitcoin ETFs rather than compete with them. Having previously worked in depositary-receipt teams at Citigroup, Mehta and his co-founders bring expertise to RDC.
Unlike Bitcoin ETFs redeemable for cash, depositary receipts provide qualified institutions direct ownership of Bitcoin. For regulated institutions, direct Bitcoin purchase isn’t the favored choice due to challenges in crypto markets like security risks and regulatory uncertainties. These challenges resemble those faced by Americans investing in foreign companies, which were tackled by American depositary receipts.
Ishaan Narain, one of the co-founders, highlighted the time taken for market-infrastructure issues to evolve in the digital-asset sphere, prompting RDC to partner with service providers meeting institutional demands.
Bitcoin was designed to eliminate centralized clearinghouses using decentralized blockchain technology. However, RDC founders believe that institutions will find comfort in Bitcoin depositary receipts, aligning with traditional market standards.
Diogo Mónica, co-founder of Anchorage Digital, anticipates that 2024 will witness a convergence of traditional finance standards, like depositary receipts, into the digital-asset landscape, benefiting institutions cautious due to regulatory uncertainty.
Although Citigroup had earlier explored a similar product in 2018, the three RDC co-founders were part of that initiative. However, Mehta clarified that RDC’s offering is distinct from Citigroup’s exploration into depositary receipts for various asset classes.
