Former executives from Citigroup Inc. have introduced Bitcoin-backed securities, named Bitcoin depositary receipts (BTC DRs), designed to circumvent the need for SEC approval. The Receipts Depositary Corporation (RDC) startup aims to issue these BTC DRs to global institutional investors, exempting them from registration under the Securities Act of 1933.

BTC DRs are akin to American depositary receipts for foreign stocks, offering institutional access to Bitcoin securities through U.S. regulated market infrastructure. These securities will be cleared through the Depository Trust Co. Ankit Mehta, RDC co-founder and former Citigroup executive, described the offering as a tool for converting Bitcoin into a DTC-eligible security, facilitating direct ownership within U.S. clearances.

Broadridge Corporate Issuer Solutions will act as the transfer agent, with Anchorage Digital Bank National Association managing the custody of the underlying Bitcoin. RDC has garnered support from investors such as Franklin Templeton, BTIG, and Broadhaven Ventures.

The launch coincides with rising optimism about the SEC's potential approval of spot-Bitcoin ETFs. RDC's product is seen as complementary to Bitcoin ETFs, offering direct Bitcoin ownership for qualified institutions. This differs from Bitcoin ETFs, which are typically redeemed for cash.

The RDC founders, including Bryant Kim and Ishaan Narain, formerly of Citi’s depositary-receipt team, recognize the challenges in direct Bitcoin investment for regulated institutions, such as security risks and regulatory uncertainty. Their solution draws on the concept of American depositary receipts, which mitigated similar issues for U.S. investors in foreign companies.

The BTC DRs are intended to bridge traditional financial standards with the digital asset ecosystem, combining the decentralized nature of Bitcoin with familiar institutional practices. Anchorage Digital's co-founder Diogo Mónica highlights the importance of adapting traditional financial mechanisms, like depositary receipts, to the digital asset world, particularly for institutions hesitant due to regulatory uncertainties.

RDC's approach is distinct from an earlier digital-asset receipt project explored by Citigroup in 2018, with the RDC founders having been part of the team involved in that initial exploration at Citigroup. Mehta emphasizes that RDC's offering is independent of Citigroup’s previous endeavors in this area.

Bloomberg