Former Citigroup executives have initiated a groundbreaking venture aimed at introducing a new investment avenue for Bitcoin. This pioneering move seeks to provide institutional investors with access to Bitcoin-backed securities without requiring approval from U.S. regulatory bodies.
Introduction of Bitcoin Depositary Receipts (BTC DRs)
The brainchild of these former Citigroup leaders materialized in the form of Receipts Depositary Corporation (RDC). RDC’s creation, known as Bitcoin Depositary Receipts (BTC DRs), echoes the structure of American Depositary Receipts (ADRs) representing foreign stocks. Institutions will have access to the ‘BTC DRs,’ which undergo clearance via the Depository Trust Company (DTC).
Bitcoin-Backed Securities: Easy Access for Global Institutional Investors
The primary objective here revolves around offering BTC DRs to qualified global institutional investors, circumventing the need for registrations under the Securities Act of 1933. This strategic move ensures a streamlined and hassle-free entry into the Bitcoin investment sphere.
The startup strategically aligns its operations within U.S.-regulated market infrastructure, facilitating secure access to Bitcoin securities. By securing clearance through the Depository Trust Company (DTC), RDC ensures compliance and reliability for institutional investors seeking exposure to Bitcoin.
CEO Insights
Ankit Mehta, co-founder and CEO of RDC, sheds light on the innovative product’s purpose.
He emphasizes the firm’s role as a conversion tool for diverse asset owners, including hedge funds, family offices, and large institutional investors. Mehta underscores the transformation of Bitcoin holdings into DTC-eligible securities, thereby enabling direct ownership in U.S. markets.
Before establishing RDC, Mehta, along with his co-founders Bryant Kim and Ishaan Narain, were part of Citi’s depositary-receipt team.
He stated:
“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 […] There are many benefits to using depositary receipts, such as their tried and true structure, providing direct ownership of the underlying asset and easy inclusion in institutional products.”
Ishaan Narain, another former Citi executive added:
“These market-infrastructure issues and challenges obviously took some time to evolve in the digital-asset marketplace […] which is why when we set up this product, we made sure we partner with the right partners to provide those segregated services that these institutions look for.”
In 2018, Citigroup initiated a comparable project, mentioned by Bloomberg. The trio of founders, previously part of Citi’s team exploring digital-asset receipts, focused on exploring depositary receipts across multiple asset categories. Mehta emphasized that their proposition stands distinctly apart from the endeavors undertaken at Citi.
Collaborative Partnerships
To bolster its operational framework, RDC has forged essential partnerships. Broadridge Corporate Issuer Solutions acts as the transfer agent, streamlining transaction processes. Anchorage Digital Bank National Association takes charge of custody for the underlying Bitcoin, ensuring secure management of assets.
According to Bloomberg, Diogo Mónica, one of the founders and currently serving as president at Anchorage Digital, expressed:
“Bringing market standards from traditional finance — like depositary receipts — to the digital-asset ecosystem will be a major theme heading into 2024 […] The majority of traditional institutions want direct exposure to Bitcoin, but some are still on the sidelines due to regulatory uncertainty. For these players, using Bitcoin depositary receipts unlocks the best of both worlds.”
Addressing Institutional Investment Needs
This new initiative aims to cater to institutional demands for Bitcoin investments, a niche potentially underserved by impending Bitcoin ETFs. While the market eagerly awaits the approval of a Spot Bitcoin ETF by the United States Securities and Exchange Commission (SEC), RDC’s offering provides a distinct advantage. Unlike Bitcoin ETFs redeeming for cash, BTC DRs offer direct ownership of Bitcoin, a factor likely to appeal to certain institutions.
Impact on the Bitcoin Market
Coinciding with the unveiling of RDC’s innovative solution, the Bitcoin market witnessed a fluctuation. Despite a recent 5.23% drop in Bitcoin’s price and its partial rebound, currently standing at around $43,500 mark, there’s been a notable increase in 24-hour trading volume, fueling further market analysis.
The initiative led by former Citigroup executives heralds a pioneering approach to Bitcoin investments. RDC’s Bitcoin Depositary Receipts aim to reshape institutional access to Bitcoin securities, offering a secure and direct avenue for ownership in the evolving Bitcoin landscape.
The launch of BTC DRs emerges as a pivotal moment, providing a bridge between traditional finance and the burgeoning realm of digital assets.
